Japan's FY 2024: 70% of Companies Increasing Pay Scales

26 Apr, 2024

Japan's FY 2024 70% of Companies Increasing Pay Scales

About 70 percent of companies in Japan are set to implement pay scale increases in fiscal year 2024, as revealed by a survey conducted by the Finance Ministry on Monday. The survey found that 70.7 percent of companies plan to raise their pay scales, marking a notable 6.3 percentage point increase from the previous year. Among small and medium-sized enterprises (SMEs), the proportion planning pay scale increases surged by 8.8 percentage points to 63.1 percent, surpassing the 3.2 percentage point increase among large companies.

Moreover, nearly 60 percent of companies are aiming for pay scale increases of 3 percent or more, showing a significant rise of 23.4 percentage points. Additionally, companies planning to implement pay scale increases and regular pay raises totaling 5 percent or more doubled from the previous year, reaching 36.5 percent.

The primary motivations cited for these pay hikes include boosting employee motivation, enhancing working conditions, and addressing inflationary pressures. However, despite these efforts, half of the SMEs surveyed expressed challenges in passing on rising labor costs to their clients, leading to concerns about profitability.

Furthermore, the survey highlighted ongoing labor shortages, with approximately 40 percent of companies still facing recruitment challenges even after raising wages. Reasons cited for these shortages include population declines and wage levels in certain industries. Some industry representatives suggested the need for flexibility in working hour regulations to address these issues.

The survey, conducted from March to April, gathered responses from around 1,100 companies across Japan.