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Minimum Wage as a Wage Policy Tool in Japan

Author

Listed:
  • Ms. Chie Aoyagi
  • Mr. Giovanni Ganelli
  • Nour Tawk

Abstract

Using prefectural data, we study the potential impact on wage dynamics of the planned minimum wage increase policy in Japan. Our main result is that stepping up minimum wage growth from 2 to the planned 3 percent per year could raise wage growth by 0.5 percent annually. Given Japan’s need for income policies to generate vigorous wage-price dynanics, reflecting the 2 percent inflation target, one policy implication of this finding is that, while the minimum wage plan will help boost wages, it should be accompanied by other, more “unorthodox” income policies, such as a “soft target” for private sector wage growth through a “comply -or-explain mechanism” for wage growth and increases in public wages in line with the inflation target.

Suggested Citation

  • Ms. Chie Aoyagi & Mr. Giovanni Ganelli & Nour Tawk, 2016. "Minimum Wage as a Wage Policy Tool in Japan," IMF Working Papers 2016/232, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/232
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    References listed on IDEAS

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    1. Betcherman, Gordon, 2012. "Labor market institutions : a review of the literature," Policy Research Working Paper Series 6276, The World Bank.
    2. Ms. Chie Aoyagi & Mr. Giovanni Ganelli, 2013. "The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?," IMF Working Papers 2013/202, International Monetary Fund.
    3. David S. Lee, 1999. "Wage Inequality in the United States During the 1980s: Rising Dispersion or Falling Minimum Wage?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 977-1023.
    4. John Schmitt, 2013. "Why Does the Minimum Wage Have No Discernible Effect on Employment?," CEPR Reports and Issue Briefs 2013-04, Center for Economic and Policy Research (CEPR).
    5. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    6. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    7. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," Working Papers 060708, University of California-Irvine, Department of Economics, revised Jan 2007.
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    Citations

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    Cited by:

    1. Fukao, Kyoji & Perugini, Cristiano & Pompei, Fabrizio, 2020. "Labour Market Institutions, Technology and Rent Sharing," IZA Discussion Papers 13155, IZA Network @ LISER.
    2. Yamagishi, Atsushi, 2019. "Minimum Wages and Housing Rents: Theory and Evidence from Two Countries," MPRA Paper 94238, University Library of Munich, Germany.
    3. Hara, Hiromi, 2017. "Minimum wage effects on firm-provided and worker-initiated training," Labour Economics, Elsevier, vol. 47(C), pages 149-162.
    4. Kenta IKEUCHI & Kyoji FUKAO & Cristiano PERUGINI & Fabrizio POMPEI, 2023. "Which Employers Share Rents? A firm-level analysis for Japan," Discussion papers 23048, Research Institute of Economy, Trade and Industry (RIETI).
    5. Fukao, Kyoji & Perugini, Cristiano & Pompei, Fabrizio, 2022. "Labour market regimes, technology and rent-sharing in Japan," Economic Modelling, Elsevier, vol. 112(C).
    6. Kyoji Fukao & Cristiano Perugini & Fabrizio Pompei, 2023. "Non‐standard Employment and Rent‐sharing," Economica, London School of Economics and Political Science, vol. 90(357), pages 178-211, January.
    7. Yamagishi, Atsushi, 2021. "Minimum wages and housing rents: Theory and evidence," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    8. Hayato Kanayama & Sho Miyaji & Suguru Otani, 2025. "Just After Minimum Wage Hikes: Short-Run Labor-Demand Response and Reallocation," Papers 2505.04555, arXiv.org, revised Mar 2026.

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