Japan to launch five-year plan to boost wages and productivity in SMEs

In a significant policy move aimed at revitalising wage growth and improving working conditions, the Japanese government is preparing a five-year plan to support wage hikes among small and mid-size enterprises (SMEs), which collectively employ around 70% of the nation’s workforce. The plan will form a central pillar of the country’s broader economic reform under Prime Minister Shigeru Ishiba’s “New Form of Capitalism” agenda.

According to the government sources, the initiative will call on both public and private sectors to inject approximately ¥60 trillion (US$385 billion) over five years through fiscal 2029. The investment will focus on improving productivity in labour-intensive sectors, many of which are grappling with acute manpower shortages.

The five-year plan is set to be discussed at the upcoming Council of New Form of Capitalism Realisation, chaired by the Prime Minister, and is expected to be included in the administration’s economic implementation plan due for release in June.

READ MORE: Japanese banks reshape job structures for gender equality

A key goal of the Ishiba administration is to raise Japan’s average minimum hourly wage to ¥1,500 (US$10.34) by the end of the decade. Achieving this target will require boosting productivity in sectors that have traditionally lagged behind, particularly those dominated by small businesses.

12 industries have been identified for priority intervention, including restaurants, accommodation, retail, manufacturing, nursing care, agriculture, and lifestyle-related services such as hairdressing and cleaning. These sectors will receive tailored productivity enhancement plans, primarily driven by digitalisation and labour-saving technologies.

In the restaurant sector alone, which employs around four million employees, the government aims to raise labour productivity by 35% over the next five years. Plans include the increased use of self-checkout terminals and service robots, drawing on successful case studies already in operation.

Similar productivity targets have been set for the accommodation industry, where the introduction of self-check-in machines is expected to play a central role. These technological interventions are designed to reduce the burden on employees, improve service efficiency, and ultimately create room for sustainable wage increases, reported The Japan Times.