South Korea's minimum wage exceeds Japan's for the first time in history

South Korea's hourly minimum wage exceeded Japan's for the first time. It is interpreted that this is because the value of the yen has fallen sharply, and the rate of increase in the minimum wage in South Korea has greatly exceeded that in Japan in recent years.

According to the Yomiuri Shimbun, Japan's Ministry of Health, Labor and Welfare announced on the previous day that the minimum wage set by councils in each prefecture was 961 yen per hour, a 3.3% (31 yen) increase from last year.

Following last year's rate of 3.1% (28 yen), this is the second consecutive year that the rate of increase and the amount of increase have reached record highs, and the Yomiuri Shimbun explained that this is the result of the sharp rise in prices over the past few months.

By region, Tokyo was the highest at 1,072 yen, and 10 prefectures including Okinawa, Kochi and Miyazaki were the lowest at 853 yen. The difference between the highest and lowest amount was 219 yen, 2 yen less than last year. The new minimum wage will be applied gradually from October.

Although Japan raised the minimum wage by the maximum for two years in a row, the minimum wage next year will be higher in South Korea. South Korea's minimum wage for next year has been set at 9,620 won (about 978 yen) per hour, which is 5% (460 won, about 47 yen) higher than this year's 9,160 won (about 932 yen).

The fact that South Korea's minimum wage has surpassed that of Japan for the first time in history is partly due to the fact that the value of the yen has fallen sharply since the beginning of this year. Japan adhered to negative interest rates despite the austerity monetary policy of the US Federal Reserve System (FRB), and the accompanying widening of the long-term interest rate gap between Japan and the US caused the value of the yen to plummet relative to the dollar. Meanwhile, South Korea continues to raise its base interest rate in line with the Fed, preserving the value of the won relative to the dollar.

There is also an analysis that the fact that the cumulative minimum wage increase rate in South Korea exceeded that in Japan also had an impact. According to a report titled "Consideration of Issues Regarding the Application of Minimum Wage Classification by Industry" released in June by the Korea Employers' Association, the cumulative rate of increase in the minimum wage over the past five years from 2018 to 2022 was 41.6% in South Korea and 41.6% in Japan. was aggregated at 12.1%.