Minimum Wage as a Wage Policy Tool in Japan

21 Pages Posted: 20 Jan 2017

See all articles by Chie Aoyagi

Chie Aoyagi

International Monetary Fund (IMF)

Giovanni Ganelli

International Monetary Fund (IMF) - Fiscal Affairs Department

Nour Tawk

International Monetary Fund (IMF)

Date Written: November 2016

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.

Keywords: Minimum wages, Japan, Wage policy, Income distribution, Women, Labor market characteristics, Regression analysis, minimum wage, income policies, Abenomics

JEL Classification: J31, J33, E64

Suggested Citation

Aoyagi, Chie and Ganelli, Giovanni and Tawk, Nour, Minimum Wage as a Wage Policy Tool in Japan (November 2016). IMF Working Paper No. 16/232, Available at SSRN: https://ssrn.com/abstract=2902726

Chie Aoyagi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Giovanni Ganelli

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Nour Tawk

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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