August 17, 2025 • 18 mins
🎙️Welcome back to Executive Search in Japan.
In 2025, Japan is experiencing its most dramatic shift in compensation dynamics in over three decades. Wage growth is breaking records—yet real wages continue to fall, creating a paradox for both employees and employers. Amid inflation, an aging workforce, and structural labor shortages, companies are fundamentally rethinking how they compete for—and retain—top talent.
In this episode, we unpack the economic forces, wage trends, and strategic responses defining Japan’s “new normal” in compensation.
🔍 Topics Covered:
- Japan’s Wage Surge in 2025: Average base salary increases above 5%, summer bonuses at all-time highs, and SMEs narrowing the gap with large enterprises.
- The Purchasing Power Paradox: Why real wages are declining despite historic nominal growth—and how this affects consumption and employee sentiment.
- Sector-Specific Winners: Which industries are seeing the fastest wage growth, and what roles are commanding the highest premiums in Tokyo.
- Strategic Retention Measures: How employers are going beyond salary—using bonuses, hybrid work, career mobility, and training investments to hold on to talent.
- Multinationals vs. Domestic Firms: Why global companies are rethinking compensation as Japanese firms raise the bar.
- Salary Negotiation Culture in Japan: What’s changing in how—and when—employees ask for raises, and the growing trend of changing jobs to boost pay.
- Outlook for 2026 and Beyond: Will wage growth continue? And what does this mean for executive search and talent strategy?
Japan’s labor market is in the midst of a structural reset. Tune in as we explore what it means for companies, candidates, and the future of compensation.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 01 (00:00):
Welcome to the Deep Dive, your shortcut to being
well-informed, packed withsurprising facts and just enough
humor to keep you hooked.
Now, for decades, Japan's beenThis is kind of an enigma,
right?
Stagnant wages, fightingdeflation.
It just seemed to defy globaleconomic gravity.
But now, in 2025, somethingreally unprecedented seems to be
(00:20):
happening.
We're talking about a prettyseismic shift in salaries.
So today, we're taking a closelook at what's genuinely driving
this remarkable change.
It seems to be everything frompersistent inflation reshaping
daily life to this intense warfor talent that's completely
rewriting the rulebook foremployers.
The big question we're divinginto is, Is this just a
temporary blip, or are we seeingthe dawn of a fundamentally new
(00:42):
economic Japan?
And crucially, what does itactually mean for your career
path, whether you're alreadythere or maybe considering
opportunities soon?
For this deep dive, we'vepulled insights from the latest
salary guides, market analyses,economic reports.
All looking specifically at2025.
Speaker 02 (00:57):
Our mission, really, is to give you a clear, concise
understanding of this newlandscape, hopefully helping you
navigate it with a bit moreconfidence.
So let's break this down.
Japan is, it seems,fundamentally That's
Speaker 00 (01:13):
absolutely right.
I mean, for years, Japanstruggled with falling prices,
which was a pretty uniquechallenge globally.
But now core consumer inflationis hovering around 3.7 percent.
Speaker 02 (01:24):
3.7 percent.
Speaker 00 (01:26):
Yeah.
And just for context, the Bankof Japan's own forecasts for
this fiscal year, 2025, they putthe consumer price index
increase somewhere between 2.5percent and 3.0 percent.
This is a really big increase.
I mean, frankly, a dramaticchange for a country that until
very recently was much moreworried about prices falling
than rising.
Speaker 02 (01:46):
And this isn't just numbers on a chart, is it?
This is where it gets reallyinteresting for people's daily
lives, because these risingcosts are tangibly affecting,
well, everyone across Japan.
You know, anyone who's livedthere knows the idea of staple
goods getting more expensive isquite a shift.
We're talking everydayessentials, fresh food,
utilities, even publictransport, rice prices, for
example.
(02:06):
They've seen their highest gainin over 50 years.
Speaker 00 (02:08):
Wow, it's significant.
Speaker 02 (02:10):
In the Kanto region, that's Tokyo and surrounds, the
average monthly household spendis around $265,914.
And those costs are only goingup.
So yeah, wages are increasing.
But the question is, are peopleactually feeling richer?
Or is inflation just eatingaway at those gains?
Speaker 00 (02:28):
That's exactly it, that purchasing power paradox
you touched on.
It's a critical tension rightnow.
And this pressure, it'sdefinitely forced the Bank of
Japan to act.
In what was really asignificant move, the BOJ raised
its short-term policy interestrate to 0.5% back in January
2025.
0.5%.
Speaker 02 (02:44):
Doesn't sound like much globally, but for Japan.
Speaker 00 (02:49):
Exactly.
It might seem minusculecompared to rates elsewhere, but
for Japan, which has had nearzero or even negative rates for
decades, This marks a trulymonumental shift.
It's a definitive end to thoseultra-loose monetary measures.
And there's this crucialfeedback loop here.
The strong wage hikes we saw inlast year's Shinto and
continuing in 2025, theydirectly justify the BOJ's
tightening.
It sort of signals to themarket that maybe, just maybe,
(03:12):
this new inflationaryenvironment could actually be
sustainable.
Speaker 02 (03:14):
And it's not just the central bank, right?
The government seems to bepushing this too.
Prime Minister Shigeru Ishiba'sadministration has been quite
vocal, pushing for wageincreases.
They've set this prettyambitious goal, raise the
national average minimum wage to$8,500 by the end of 2029.
Which
Speaker 00 (03:32):
is a big jump.
That requires an average annualincrease of about 7.3%.
Yeah.
Speaker 02 (03:37):
And they've even introduced that $20,000 cash
handout per adult, trying toease the immediate burden of
rising prices.
It really feels like acoordinated effort to get wages
moving.
Speaker 00 (03:47):
And it seems to be working, looking at the results.
Speaker 02 (03:49):
Right.
Which brings us to the annualspring wage negotiations, the
Shunto.
For 2025, these results seem torepresent a truly monumental
shift, something many peoplethought just wouldn't happen in
Japan.
Speaker 00 (04:00):
Indeed, the final average wage hike, according to
the Rengo Labor UnionFederation, reached 5.25
percent.
Speaker 02 (04:07):
5.2.
Speaker 00 (04:08):
And for companies surveyed by the Japan Business
Federation, Kaidanrin, it waseven a bit higher, 5.39 percent.
Now, to put this inperspective, this is the highest
level we've seen since theearly 1990s.
And significantly, it's thefirst time the 5% mark has been
surpassed for two consecutiveyears.
Speaker 02 (04:25):
After two decades of near stagnation.
Speaker 00 (04:28):
Exactly.
Following two decades wherewage growth often hovered around
maybe 1-2%, if that.
So it's a genuine breakthrough.
Speaker 02 (04:36):
And it's not just these aggregate numbers either.
We're seeing some really bigcompanies leading the charge.
Hitachi, for instance, agreedto a record 6.2% increase in
base monthly pay for 2025Toyota, Japan's biggest
automaker, gave hefty raises twoyears running.
2024 was their biggest since99, and 2025 apparently matched
that high level.
(04:56):
Even their major supplier,Denso, followed suit.
Speaker 00 (04:59):
That's important, the supply chain effect.
Speaker 02 (05:01):
Yeah.
And then there's fastretailing, you know, Unicol's
parent company.
They stunned everyone back inearly 2023 by boosting salaries
by up to 40%.
Speaker 00 (05:08):
That was huge news.
Speaker 02 (05:10):
Yeah, new grads saw about 18% higher starting pay.
Some store managers got raisesaround 36%.
And they explicitly said theywere doing it to aim for global
competitiveness.
Unknown (05:21):
Hmm.
Speaker 02 (05:21):
It's impressive seeing these giants lead, but
are these top-tier increasesreally reflective of what the
average worker is experiencing?
Is there a big gap?
Speaker 00 (05:28):
That's a really good question.
And what's fascinating here isthat this wage momentum isn't
just confined to the giants.
Small and medium-sizedenterprises, SMEs, they also saw
a significant gain, 4.65%.
Now, that's the largestincrease for that group in 33
years.
Speaker 02 (05:44):
33 years.
Wow.
Yeah.
Speaker 00 (05:46):
And this is incredibly important because
nearly 70% of Japan's employeeswork for SMEs.
So their wage increases areabsolutely crucial for these
national trends to be trulysustainable and broadly
impactful.
So while the big players lead,the SMEs are following, which is
really key.
Speaker 02 (06:04):
And that government push on the minimum wage you
mentioned earlier, that's alsohad historic results.
The Central Minimum WagesCouncil recommended a 6%
increase, about 63 yen, raisingthe national hourly minimum wage
to 11,118.
It was 1,055 before.
Speaker 00 (06:18):
Just over 1,100 yen an hour now.
Speaker 02 (06:20):
Right.
Largest hike ever in Japan,apparently.
And it means the minimum wagewill likely finally surpass
1,000 in all prefectures for thefirst time.
Speaker 00 (06:29):
That's a milestone.
Definitely.
Speaker 02 (06:31):
And in a notable effort to narrow those regional
wage gaps, the C-rankedprefectures, the economically
weaker ones, they actually got aslightly higher recommended
increase, 64 yen, for the firsttime.
It really shows a concertedeffort to lift all boats.
Speaker 00 (06:44):
Yeah, it seems quite targeted.
Speaker 02 (06:46):
So, okay, beyond inflation and government policy,
there's another huge piece tothis puzzle, isn't there?
Japan's really acute laborshortage in this resulting war
for talent.
Speaker 00 (06:55):
Absolutely.
And this isn't just talk.
We have solid data on thiscrisis.
The Bank of Japan's tank andsurvey from Q2 2025 showed its
employment diffusion index fellto negative 35.
That's across all industries.
Speaker 02 (07:08):
Minus 35.
What does that actually mean?
Speaker 00 (07:10):
It means far more companies are reporting a severe
shortage of workers than thosewho feel they have a surplus.
It's one of the lowest pointsin about three decades.
And to give you a specificexample, look at the information
services industry.
Nearly 70 percent of companiesin that sector are reporting a
shortage of regular workers.
The talent pool is justshrinking.
Speaker 02 (07:30):
So bringing this all back to, you know, someone
listening, maybe thinking abouttheir career.
What does this actually mean onthe ground?
This talent scarcity It seemslike it's fundamentally shifted
the bargaining power towardsemployees, right?
Retention must be top prioritynow.
Speaker 00 (07:45):
Definitely.
Companies are implementingtargeted raises, especially for
those mid-level and associatelevel employees.
That's where the shortages aremost acute.
Something like 40, 45 percentof firms report vacancies in
those specific roles.
Speaker 02 (07:58):
So they're trying to lock down that core group.
Speaker 00 (08:00):
Exactly.
They're actively trying to keeptheir core young and mid-career
employees from jumping shipbecause they know they're hard
to replace.
And it's not just about thebase salary anymore.
Companies are moving beyondjust that annual raise.
We saw record setting summerbonuses in twenty twenty five,
averaging nine hundred andseventy four thousand.
That's like a secondsignificant financial adjustment
(08:20):
in the year.
Speaker 02 (08:21):
Almost a million yen bonus on average.
Speaker 00 (08:23):
Yeah.
pretty substantial.
And beyond money, they're alsofocusing hard on non-monetary
retention strategies, thingslike embracing hybrid work
models, investing more intraining and support systems,
trying to build strong corporatecultures with clear career
progression paths.
It's becoming much more of afull package deal.
Speaker 02 (08:43):
And it's also worth noting these huge variations
between sectors, isn't it?
The information andcommunications sector, you
mentioned tech, led the way withan 8.24 percent average
increase.
Speaker 00 (08:53):
That
Speaker 02 (08:55):
really reflects the intense competition for talent
in those high demand fields.
AI software services,cybersecurity, robotics, fields
that McKinsey forecasts willcontribute significantly to
global GDP by 2040.
So I guess if you're in one ofthose fields, your bargaining
power is even stronger.
Speaker 00 (09:11):
MELANIE WARRICK- Much stronger.
And if we connect this to thebigger picture, these kinds of
sectoral differences, theyreally signal an erosion of that
traditional seniority-based paysystem, the nemkujiretsu.
MARK MIRCHANDANI-
Speaker 02 (09:20):
Right, pay based on age and years of service.
Speaker 00 (09:22):
MELANIE WARRICK- Exactly.
And this isn't just a tweak inpay structure.
It's a pretty profoundchallenge to Japan's traditional
ideas about corporate loyaltyand lifelong careers.
In its place, we're seeing thisshift towards a more
merit-based, skill-drivencompensation model.
And this evolution, frankly, isessential if Japan wants to
compete for global talent andfoster a more dynamic,
(09:45):
performance-driven workforce.
It signals a new era wheremaybe job hopping for higher
pay, which used to be reallyfrowned upon, is becoming a much
more accepted, even strategicmove.
Speaker 02 (09:56):
MARK MIRCHANDANI Okay, so given these huge shifts
at the macro level, what doesthis actually mean for you, the
listener, navigating Japan's jobmarket right now?
How can you strategicallyleverage these changes, whether
you're, say, looking for a raisein your current role or maybe
maybe exploring newopportunities?
Speaker 00 (10:10):
Well, first, I think it's key to understand that the
compensation frameworksthemselves are evolving.
While those traditionalseniority-based raises still
exist, the dominant trend nowadopted by over 70% of Japanese
companies apparently is towardsperformance-based and
skill-based systems, which meansyour individual contributions,
your specific skills, they'reincreasingly important in
(10:30):
determining your pay, much moreso than maybe 10, 20 years ago.
Speaker 02 (10:34):
Okay, let's drill down then.
How do you strategicallyapproach asking for a raise
within a Japanese company,because that can feel daunting.
First up, timing seemscritical.
When's the right moment?
Speaker 00 (10:48):
Yeah, timing is key.
The best time is usually duringyour company's formal
evaluation period.
That often falls aroundFebruary, March, or maybe
August, September.
Okay.
Or, alternatively, right afteryou've had a major achievement,
completed a big projectsuccessfully, definitely avoid
bringing it up too soon afterjoining, or like during the
busiest crunch time of the year.
Right,
Speaker 02 (11:08):
read the room.
Okay, second point.
Prepare your case and make itdata-driven.
Speaker 00 (11:12):
Absolutely crucial, especially in Japan.
Preparation often counts formore than just boldness.
You need to show clear evidenceof your contributions.
Think project outcomes,quantifiable results.
How did your work improvethings?
Did it save time?
Boost revenue?
Cut costs?
Also, include any newcertifications or skills you've
picked up.
(11:33):
And definitely use externalsalary benchmarks to support
your request.
It shows you've done yourhomework.
Speaker 02 (11:38):
And maybe rehearse your points.
Especially if you need to do itin Japanese.
Speaker 00 (11:42):
Definitely recommend rehearsing, yes.
Particularly the key phrasesand justifications.
Speaker 02 (11:46):
Okay, third.
Know who to talk to.
Follow the chain of command.
Speaker 00 (11:51):
Yes, always.
Start with your direct manageror maybe your team leader.
That's usually the person whoconducts your evaluation anyway.
Don't try to bypass them and gostraight to upper management or
HR.
That usually doesn't go overwell.
Speaker 02 (12:02):
Got it.
Fourth point, framing theconversation professionally.
This sounds really important inthe Japanese context.
Speaker 00 (12:08):
Extremely important.
Humility and politeness areabsolutely key.
So instead of Making a demand.
Try phrasing it more like, um,based on my recent contributions
and performance, I was hopingwe could discuss the possibility
of a salary review.
Something like that.
Speaker 02 (12:24):
Softer approach.
Speaker 00 (12:25):
Exactly.
Maybe start by expressinggratitude for your current role
and the opportunities you haveand be genuinely open to
feedback they might give you.
Speaker 02 (12:32):
Okay.
And finally, what if the answeris no?
You need to prepare for that,too.
Speaker 00 (12:37):
You absolutely do.
Not every request will succeed,especially in more traditional
Japanese companies where paystructures can still be quite
rigid based on those seniorityscales.
If your request is turned down,the key is to stay
professional.
Don't get defensive oremotional.
Speaker 02 (12:52):
Use it as an opportunity.
Speaker 00 (12:54):
Yeah, exactly.
Use it to plan your next steps.
you could ask politely what youwould need to achieve for a
raise to be considered in thefuture, or perhaps ask if the
discussion can be revisited in,say, six months.
It's just worth rememberingthat in some very traditional
workplaces, actively negotiatingsalary can still sometimes be
viewed as a bit overlyassertive.
(13:15):
So tread carefully.
Speaker 02 (13:18):
But that said, given the current market.
Speaker 00 (13:20):
Right.
Statistically speaking,changing jobs is often the most
effective way to get asignificant salary bump in Japan
right now.
The data shows around 40percent of job changers received
an increase and a prettysignificant chunk, 13.8 percent,
saw their pay jump by over 10percent in 2024 alone.
Speaker 02 (13:37):
10 percent or more just by moving.
Speaker 00 (13:39):
Yeah.
So it's often a quicker path tohigher pay than trying to
negotiate internally, especiallyif you're hitting a ceiling.
Speaker 02 (13:44):
OK, so what about if you're looking at a new job
offer?
What are some negotiationsAbsolutely.
Speaker 00 (13:53):
Negotiating isn't just about getting more money.
It signals that you understandyour value, you've done your
research on the market, andyou're serious about the
opportunity.
Frankly, most employers expectsome level of negotiation now.
Speaker 02 (14:06):
So tactically, when's the moment?
Speaker 00 (14:09):
Best to wait until you have a formal written job
offer in hand.
Any discussions before that arereally just about aligning
general salary expectations, notthe final negotiation.
Speaker 02 (14:20):
Okay.
And if they give you a salaryrange?
Speaker 00 (14:21):
If they offer a range, you should generally aim
for the higher end, but beprepared to justify it.
Point to your specificexperience, your skills, the
value you expect to bring, mayberesponsibilities that go beyond
the standard job description.
Speaker 02 (14:35):
Use that external data.
Speaker 00 (14:36):
Definitely.
Reference external salary data,like say the Robert Alter
salary survey or similarreputable sources.
It may makes your case muchmore credible than just saying I
want more.
Speaker 02 (14:45):
And how do you actually ask for more without
sounding difficult?
Speaker 00 (14:49):
Start by expressing genuine appreciation for the
offer.
Then clearly explain yourreasoning for asking for a
higher figure.
Base it on your experience, themarket rates you've researched,
or perhaps specificresponsibilities outlined in the
role description.
Speaker 02 (15:03):
How much more is reasonable to ask for?
A
Speaker 00 (15:06):
common guideline is maybe aiming for 5 to 10 percent
more than the initial offer.
Pushing for much more than thatcan sometimes backfire unless
you have exceptionally strongjustification.
Speaker 02 (15:16):
And remember, it's not just about the base salary,
right?
Right.
The whole package.
Speaker 00 (15:20):
Crucial point.
Salary is just one piece.
Always consider the fullcompensation package.
Look at bonuses.
Are they guaranteed orperformance-based?
What's the holiday allowance?
Are there flexible workingarrangements?
Training and developmentopportunities.
Sometimes if an employer saysthe base salary is fixed, they
might have flexibility on theseother benefits instead.
So always ask about the wholepicture.
Speaker 02 (15:41):
Good tip.
And finally, what are the bigmistakes to avoid during
negotiation?
Speaker 00 (15:46):
Number one.
Don't accept the first offertoo quickly, especially if you
haven't had time to evaluate itproperly.
Give yourself time to think.
Two, don't make it personal oremotional.
Keep it focused on professionalvalue and market rates.
Three, avoid being vague.
Be specific about the salaryyou're seeking and why.
And finally, definitely don'tbe confrontational or issue
(16:10):
ultimatums.
The goal is a positive,collaborative start to your new
role.
Speaker 02 (16:15):
Right.
OK, one more area to touch on.
International firms in Japan,we often hear they pay more.
But is that still true in thisnew environment?
Speaker 00 (16:22):
It's become a bit more nuanced, actually.
Historically, yes, foreignaffiliated companies often paid
a premium to attract talentcompared to domestic firms.
But that gap seems to benarrowing.
Some recent studies evensuggest that non-Japanese
companies, on average, raisedwages at a slightly lower rate
during this current wage boom,perhaps because they're tied to
global pay structures thatdidn't see the same pressures as
(16:42):
Japan specifically.
Oh, interesting.
However, foreign firms arestill generally more likely to
be planning some form of payincrease across all employee
levels compared to some domesticfirms.
And interestingly, somedomestic firms are now actually
outpacing foreign rivals inentry level pay, trying really
hard to attract those newgraduates in this tight market.
Speaker 02 (17:03):
So it's shifting.
Speaker 00 (17:04):
It is.
But that said, in high So whata profound shift we've really
seen unfold
Speaker 02 (17:30):
here.
Japan's entire employmentculture seems to be
fundamentally changing, doesn'tit?
Offering unprecedentedbargaining power back to
workers.
After decades of being kind ofstuck in that low wage
deflationary cycle, 2025 hastruly signaled, well, a new era,
it seems.
Speaker 00 (17:47):
It really has, though it is still a complex
economic environment.
As we discussed, while thereare these significant nominal
gains in wages, we're stillgrappling with that crisis.
purchasing power paradox.
Speaker 02 (17:57):
Right.
The inflation eating into theraises.
Speaker 00 (17:59):
Exactly.
Those nominal gains aren'talways keeping pace with the
rising cost of living foreveryone.
And this raises a reallyimportant question for the
future.
How will this new wage driveneconomic model truly impact
consumption?
Will it lead to sustained realgrowth, not just nominal
increases that get swallowed upby inflation?
(18:20):
That's really the big challengeahead for Japan.
Speaker 02 (18:22):
Absolutely.
And so perhaps we leave you,the listener, with this final
provocative thought to mullover.
What stands out most to youabout this profound change in
Japan's whole approach to wages?
How might these shifts redefinenot just salaries, but career
paths, company loyalty, maybeeven living standards in one of
the world's most uniqueeconomies?
Not just for 2025, but perhapsfor the entire decade ahead.
Welcome to the Deep Dive, your shortcut to being
well-informed, packed withsurprising facts and just enough
humor to keep you hooked.
Now, for decades, Japan's beenThis is kind of an enigma,
right?
Stagnant wages, fightingdeflation.
It just seemed to defy globaleconomic gravity.
But now, in 2025, somethingreally unprecedented seems to be
(00:20):
happening.
We're talking about a prettyseismic shift in salaries.
So today, we're taking a closelook at what's genuinely driving
this remarkable change.
It seems to be everything frompersistent inflation reshaping
daily life to this intense warfor talent that's completely
rewriting the rulebook foremployers.
The big question we're divinginto is, Is this just a
temporary blip, or are we seeingthe dawn of a fundamentally new
(00:42):
economic Japan?
And crucially, what does itactually mean for your career
path, whether you're alreadythere or maybe considering
opportunities soon?
For this deep dive, we'vepulled insights from the latest
salary guides, market analyses,economic reports.
All looking specifically at2025.
Speaker 02 (00:57):
Our mission, really, is to give you a clear, concise
understanding of this newlandscape, hopefully helping you
navigate it with a bit moreconfidence.
So let's break this down.
Japan is, it seems,fundamentally That's
Speaker 00 (01:13):
absolutely right.
I mean, for years, Japanstruggled with falling prices,
which was a pretty uniquechallenge globally.
But now core consumer inflationis hovering around 3.7 percent.
Speaker 02 (01:24):
3.7 percent.
Speaker 00 (01:26):
Yeah.
And just for context, the Bankof Japan's own forecasts for
this fiscal year, 2025, they putthe consumer price index
increase somewhere between 2.5percent and 3.0 percent.
This is a really big increase.
I mean, frankly, a dramaticchange for a country that until
very recently was much moreworried about prices falling
than rising.
Speaker 02 (01:46):
And this isn't just numbers on a chart, is it?
This is where it gets reallyinteresting for people's daily
lives, because these risingcosts are tangibly affecting,
well, everyone across Japan.
You know, anyone who's livedthere knows the idea of staple
goods getting more expensive isquite a shift.
We're talking everydayessentials, fresh food,
utilities, even publictransport, rice prices, for
example.
(02:06):
They've seen their highest gainin over 50 years.
Speaker 00 (02:08):
Wow, it's significant.
Speaker 02 (02:10):
In the Kanto region, that's Tokyo and surrounds, the
average monthly household spendis around $265,914.
And those costs are only goingup.
So yeah, wages are increasing.
But the question is, are peopleactually feeling richer?
Or is inflation just eatingaway at those gains?
Speaker 00 (02:28):
That's exactly it, that purchasing power paradox
you touched on.
It's a critical tension rightnow.
And this pressure, it'sdefinitely forced the Bank of
Japan to act.
In what was really asignificant move, the BOJ raised
its short-term policy interestrate to 0.5% back in January
2025.
0.5%.
Speaker 02 (02:44):
Doesn't sound like much globally, but for Japan.
Speaker 00 (02:49):
Exactly.
It might seem minusculecompared to rates elsewhere, but
for Japan, which has had nearzero or even negative rates for
decades, This marks a trulymonumental shift.
It's a definitive end to thoseultra-loose monetary measures.
And there's this crucialfeedback loop here.
The strong wage hikes we saw inlast year's Shinto and
continuing in 2025, theydirectly justify the BOJ's
tightening.
It sort of signals to themarket that maybe, just maybe,
(03:12):
this new inflationaryenvironment could actually be
sustainable.
Speaker 02 (03:14):
And it's not just the central bank, right?
The government seems to bepushing this too.
Prime Minister Shigeru Ishiba'sadministration has been quite
vocal, pushing for wageincreases.
They've set this prettyambitious goal, raise the
national average minimum wage to$8,500 by the end of 2029.
Which
Speaker 00 (03:32):
is a big jump.
That requires an average annualincrease of about 7.3%.
Yeah.
Speaker 02 (03:37):
And they've even introduced that $20,000 cash
handout per adult, trying toease the immediate burden of
rising prices.
It really feels like acoordinated effort to get wages
moving.
Speaker 00 (03:47):
And it seems to be working, looking at the results.
Speaker 02 (03:49):
Right.
Which brings us to the annualspring wage negotiations, the
Shunto.
For 2025, these results seem torepresent a truly monumental
shift, something many peoplethought just wouldn't happen in
Japan.
Speaker 00 (04:00):
Indeed, the final average wage hike, according to
the Rengo Labor UnionFederation, reached 5.25
percent.
Speaker 02 (04:07):
5.2.
Speaker 00 (04:08):
And for companies surveyed by the Japan Business
Federation, Kaidanrin, it waseven a bit higher, 5.39 percent.
Now, to put this inperspective, this is the highest
level we've seen since theearly 1990s.
And significantly, it's thefirst time the 5% mark has been
surpassed for two consecutiveyears.
Speaker 02 (04:25):
After two decades of near stagnation.
Speaker 00 (04:28):
Exactly.
Following two decades wherewage growth often hovered around
maybe 1-2%, if that.
So it's a genuine breakthrough.
Speaker 02 (04:36):
And it's not just these aggregate numbers either.
We're seeing some really bigcompanies leading the charge.
Hitachi, for instance, agreedto a record 6.2% increase in
base monthly pay for 2025Toyota, Japan's biggest
automaker, gave hefty raises twoyears running.
2024 was their biggest since99, and 2025 apparently matched
that high level.
(04:56):
Even their major supplier,Denso, followed suit.
Speaker 00 (04:59):
That's important, the supply chain effect.
Speaker 02 (05:01):
Yeah.
And then there's fastretailing, you know, Unicol's
parent company.
They stunned everyone back inearly 2023 by boosting salaries
by up to 40%.
Speaker 00 (05:08):
That was huge news.
Speaker 02 (05:10):
Yeah, new grads saw about 18% higher starting pay.
Some store managers got raisesaround 36%.
And they explicitly said theywere doing it to aim for global
competitiveness.
Unknown (05:21):
Hmm.
Speaker 02 (05:21):
It's impressive seeing these giants lead, but
are these top-tier increasesreally reflective of what the
average worker is experiencing?
Is there a big gap?
Speaker 00 (05:28):
That's a really good question.
And what's fascinating here isthat this wage momentum isn't
just confined to the giants.
Small and medium-sizedenterprises, SMEs, they also saw
a significant gain, 4.65%.
Now, that's the largestincrease for that group in 33
years.
Speaker 02 (05:44):
33 years.
Wow.
Yeah.
Speaker 00 (05:46):
And this is incredibly important because
nearly 70% of Japan's employeeswork for SMEs.
So their wage increases areabsolutely crucial for these
national trends to be trulysustainable and broadly
impactful.
So while the big players lead,the SMEs are following, which is
really key.
Speaker 02 (06:04):
And that government push on the minimum wage you
mentioned earlier, that's alsohad historic results.
The Central Minimum WagesCouncil recommended a 6%
increase, about 63 yen, raisingthe national hourly minimum wage
to 11,118.
It was 1,055 before.
Speaker 00 (06:18):
Just over 1,100 yen an hour now.
Speaker 02 (06:20):
Right.
Largest hike ever in Japan,apparently.
And it means the minimum wagewill likely finally surpass
1,000 in all prefectures for thefirst time.
Speaker 00 (06:29):
That's a milestone.
Definitely.
Speaker 02 (06:31):
And in a notable effort to narrow those regional
wage gaps, the C-rankedprefectures, the economically
weaker ones, they actually got aslightly higher recommended
increase, 64 yen, for the firsttime.
It really shows a concertedeffort to lift all boats.
Speaker 00 (06:44):
Yeah, it seems quite targeted.
Speaker 02 (06:46):
So, okay, beyond inflation and government policy,
there's another huge piece tothis puzzle, isn't there?
Japan's really acute laborshortage in this resulting war
for talent.
Speaker 00 (06:55):
Absolutely.
And this isn't just talk.
We have solid data on thiscrisis.
The Bank of Japan's tank andsurvey from Q2 2025 showed its
employment diffusion index fellto negative 35.
That's across all industries.
Speaker 02 (07:08):
Minus 35.
What does that actually mean?
Speaker 00 (07:10):
It means far more companies are reporting a severe
shortage of workers than thosewho feel they have a surplus.
It's one of the lowest pointsin about three decades.
And to give you a specificexample, look at the information
services industry.
Nearly 70 percent of companiesin that sector are reporting a
shortage of regular workers.
The talent pool is justshrinking.
Speaker 02 (07:30):
So bringing this all back to, you know, someone
listening, maybe thinking abouttheir career.
What does this actually mean onthe ground?
This talent scarcity It seemslike it's fundamentally shifted
the bargaining power towardsemployees, right?
Retention must be top prioritynow.
Speaker 00 (07:45):
Definitely.
Companies are implementingtargeted raises, especially for
those mid-level and associatelevel employees.
That's where the shortages aremost acute.
Something like 40, 45 percentof firms report vacancies in
those specific roles.
Speaker 02 (07:58):
So they're trying to lock down that core group.
Speaker 00 (08:00):
Exactly.
They're actively trying to keeptheir core young and mid-career
employees from jumping shipbecause they know they're hard
to replace.
And it's not just about thebase salary anymore.
Companies are moving beyondjust that annual raise.
We saw record setting summerbonuses in twenty twenty five,
averaging nine hundred andseventy four thousand.
That's like a secondsignificant financial adjustment
(08:20):
in the year.
Speaker 02 (08:21):
Almost a million yen bonus on average.
Speaker 00 (08:23):
Yeah.
pretty substantial.
And beyond money, they're alsofocusing hard on non-monetary
retention strategies, thingslike embracing hybrid work
models, investing more intraining and support systems,
trying to build strong corporatecultures with clear career
progression paths.
It's becoming much more of afull package deal.
Speaker 02 (08:43):
And it's also worth noting these huge variations
between sectors, isn't it?
The information andcommunications sector, you
mentioned tech, led the way withan 8.24 percent average
increase.
Speaker 00 (08:53):
That
Speaker 02 (08:55):
really reflects the intense competition for talent
in those high demand fields.
AI software services,cybersecurity, robotics, fields
that McKinsey forecasts willcontribute significantly to
global GDP by 2040.
So I guess if you're in one ofthose fields, your bargaining
power is even stronger.
Speaker 00 (09:11):
MELANIE WARRICK- Much stronger.
And if we connect this to thebigger picture, these kinds of
sectoral differences, theyreally signal an erosion of that
traditional seniority-based paysystem, the nemkujiretsu.
MARK MIRCHANDANI-
Speaker 02 (09:20):
Right, pay based on age and years of service.
Speaker 00 (09:22):
MELANIE WARRICK- Exactly.
And this isn't just a tweak inpay structure.
It's a pretty profoundchallenge to Japan's traditional
ideas about corporate loyaltyand lifelong careers.
In its place, we're seeing thisshift towards a more
merit-based, skill-drivencompensation model.
And this evolution, frankly, isessential if Japan wants to
compete for global talent andfoster a more dynamic,
(09:45):
performance-driven workforce.
It signals a new era wheremaybe job hopping for higher
pay, which used to be reallyfrowned upon, is becoming a much
more accepted, even strategicmove.
Speaker 02 (09:56):
MARK MIRCHANDANI Okay, so given these huge shifts
at the macro level, what doesthis actually mean for you, the
listener, navigating Japan's jobmarket right now?
How can you strategicallyleverage these changes, whether
you're, say, looking for a raisein your current role or maybe
maybe exploring newopportunities?
Speaker 00 (10:10):
Well, first, I think it's key to understand that the
compensation frameworksthemselves are evolving.
While those traditionalseniority-based raises still
exist, the dominant trend nowadopted by over 70% of Japanese
companies apparently is towardsperformance-based and
skill-based systems, which meansyour individual contributions,
your specific skills, they'reincreasingly important in
(10:30):
determining your pay, much moreso than maybe 10, 20 years ago.
Speaker 02 (10:34):
Okay, let's drill down then.
How do you strategicallyapproach asking for a raise
within a Japanese company,because that can feel daunting.
First up, timing seemscritical.
When's the right moment?
Speaker 00 (10:48):
Yeah, timing is key.
The best time is usually duringyour company's formal
evaluation period.
That often falls aroundFebruary, March, or maybe
August, September.
Okay.
Or, alternatively, right afteryou've had a major achievement,
completed a big projectsuccessfully, definitely avoid
bringing it up too soon afterjoining, or like during the
busiest crunch time of the year.
Right,
Speaker 02 (11:08):
read the room.
Okay, second point.
Prepare your case and make itdata-driven.
Speaker 00 (11:12):
Absolutely crucial, especially in Japan.
Preparation often counts formore than just boldness.
You need to show clear evidenceof your contributions.
Think project outcomes,quantifiable results.
How did your work improvethings?
Did it save time?
Boost revenue?
Cut costs?
Also, include any newcertifications or skills you've
picked up.
(11:33):
And definitely use externalsalary benchmarks to support
your request.
It shows you've done yourhomework.
Speaker 02 (11:38):
And maybe rehearse your points.
Especially if you need to do itin Japanese.
Speaker 00 (11:42):
Definitely recommend rehearsing, yes.
Particularly the key phrasesand justifications.
Speaker 02 (11:46):
Okay, third.
Know who to talk to.
Follow the chain of command.
Speaker 00 (11:51):
Yes, always.
Start with your direct manageror maybe your team leader.
That's usually the person whoconducts your evaluation anyway.
Don't try to bypass them and gostraight to upper management or
HR.
That usually doesn't go overwell.
Speaker 02 (12:02):
Got it.
Fourth point, framing theconversation professionally.
This sounds really important inthe Japanese context.
Speaker 00 (12:08):
Extremely important.
Humility and politeness areabsolutely key.
So instead of Making a demand.
Try phrasing it more like, um,based on my recent contributions
and performance, I was hopingwe could discuss the possibility
of a salary review.
Something like that.
Speaker 02 (12:24):
Softer approach.
Speaker 00 (12:25):
Exactly.
Maybe start by expressinggratitude for your current role
and the opportunities you haveand be genuinely open to
feedback they might give you.
Speaker 02 (12:32):
Okay.
And finally, what if the answeris no?
You need to prepare for that,too.
Speaker 00 (12:37):
You absolutely do.
Not every request will succeed,especially in more traditional
Japanese companies where paystructures can still be quite
rigid based on those seniorityscales.
If your request is turned down,the key is to stay
professional.
Don't get defensive oremotional.
Speaker 02 (12:52):
Use it as an opportunity.
Speaker 00 (12:54):
Yeah, exactly.
Use it to plan your next steps.
you could ask politely what youwould need to achieve for a
raise to be considered in thefuture, or perhaps ask if the
discussion can be revisited in,say, six months.
It's just worth rememberingthat in some very traditional
workplaces, actively negotiatingsalary can still sometimes be
viewed as a bit overlyassertive.
(13:15):
So tread carefully.
Speaker 02 (13:18):
But that said, given the current market.
Speaker 00 (13:20):
Right.
Statistically speaking,changing jobs is often the most
effective way to get asignificant salary bump in Japan
right now.
The data shows around 40percent of job changers received
an increase and a prettysignificant chunk, 13.8 percent,
saw their pay jump by over 10percent in 2024 alone.
Speaker 02 (13:37):
10 percent or more just by moving.
Speaker 00 (13:39):
Yeah.
So it's often a quicker path tohigher pay than trying to
negotiate internally, especiallyif you're hitting a ceiling.
Speaker 02 (13:44):
OK, so what about if you're looking at a new job
offer?
What are some negotiationsAbsolutely.
Speaker 00 (13:53):
Negotiating isn't just about getting more money.
It signals that you understandyour value, you've done your
research on the market, andyou're serious about the
opportunity.
Frankly, most employers expectsome level of negotiation now.
Speaker 02 (14:06):
So tactically, when's the moment?
Speaker 00 (14:09):
Best to wait until you have a formal written job
offer in hand.
Any discussions before that arereally just about aligning
general salary expectations, notthe final negotiation.
Speaker 02 (14:20):
Okay.
And if they give you a salaryrange?
Speaker 00 (14:21):
If they offer a range, you should generally aim
for the higher end, but beprepared to justify it.
Point to your specificexperience, your skills, the
value you expect to bring, mayberesponsibilities that go beyond
the standard job description.
Speaker 02 (14:35):
Use that external data.
Speaker 00 (14:36):
Definitely.
Reference external salary data,like say the Robert Alter
salary survey or similarreputable sources.
It may makes your case muchmore credible than just saying I
want more.
Speaker 02 (14:45):
And how do you actually ask for more without
sounding difficult?
Speaker 00 (14:49):
Start by expressing genuine appreciation for the
offer.
Then clearly explain yourreasoning for asking for a
higher figure.
Base it on your experience, themarket rates you've researched,
or perhaps specificresponsibilities outlined in the
role description.
Speaker 02 (15:03):
How much more is reasonable to ask for?
A
Speaker 00 (15:06):
common guideline is maybe aiming for 5 to 10 percent
more than the initial offer.
Pushing for much more than thatcan sometimes backfire unless
you have exceptionally strongjustification.
Speaker 02 (15:16):
And remember, it's not just about the base salary,
right?
Right.
The whole package.
Speaker 00 (15:20):
Crucial point.
Salary is just one piece.
Always consider the fullcompensation package.
Look at bonuses.
Are they guaranteed orperformance-based?
What's the holiday allowance?
Are there flexible workingarrangements?
Training and developmentopportunities.
Sometimes if an employer saysthe base salary is fixed, they
might have flexibility on theseother benefits instead.
So always ask about the wholepicture.
Speaker 02 (15:41):
Good tip.
And finally, what are the bigmistakes to avoid during
negotiation?
Speaker 00 (15:46):
Number one.
Don't accept the first offertoo quickly, especially if you
haven't had time to evaluate itproperly.
Give yourself time to think.
Two, don't make it personal oremotional.
Keep it focused on professionalvalue and market rates.
Three, avoid being vague.
Be specific about the salaryyou're seeking and why.
And finally, definitely don'tbe confrontational or issue
(16:10):
ultimatums.
The goal is a positive,collaborative start to your new
role.
Speaker 02 (16:15):
Right.
OK, one more area to touch on.
International firms in Japan,we often hear they pay more.
But is that still true in thisnew environment?
Speaker 00 (16:22):
It's become a bit more nuanced, actually.
Historically, yes, foreignaffiliated companies often paid
a premium to attract talentcompared to domestic firms.
But that gap seems to benarrowing.
Some recent studies evensuggest that non-Japanese
companies, on average, raisedwages at a slightly lower rate
during this current wage boom,perhaps because they're tied to
global pay structures thatdidn't see the same pressures as
(16:42):
Japan specifically.
Oh, interesting.
However, foreign firms arestill generally more likely to
be planning some form of payincrease across all employee
levels compared to some domesticfirms.
And interestingly, somedomestic firms are now actually
outpacing foreign rivals inentry level pay, trying really
hard to attract those newgraduates in this tight market.
Speaker 02 (17:03):
So it's shifting.
Speaker 00 (17:04):
It is.
But that said, in high So whata profound shift we've really
seen unfold
Speaker 02 (17:30):
here.
Japan's entire employmentculture seems to be
fundamentally changing, doesn'tit?
Offering unprecedentedbargaining power back to
workers.
After decades of being kind ofstuck in that low wage
deflationary cycle, 2025 hastruly signaled, well, a new era,
it seems.
Speaker 00 (17:47):
It really has, though it is still a complex
economic environment.
As we discussed, while thereare these significant nominal
gains in wages, we're stillgrappling with that crisis.
purchasing power paradox.
Speaker 02 (17:57):
Right.
The inflation eating into theraises.
Speaker 00 (17:59):
Exactly.
Those nominal gains aren'talways keeping pace with the
rising cost of living foreveryone.
And this raises a reallyimportant question for the
future.
How will this new wage driveneconomic model truly impact
consumption?
Will it lead to sustained realgrowth, not just nominal
increases that get swallowed upby inflation?
(18:20):
That's really the big challengeahead for Japan.
Speaker 02 (18:22):
Absolutely.
And so perhaps we leave you,the listener, with this final
provocative thought to mullover.
What stands out most to youabout this profound change in
Japan's whole approach to wages?
How might these shifts redefinenot just salaries, but career
paths, company loyalty, maybeeven living standards in one of
the world's most uniqueeconomies?
Not just for 2025, but perhapsfor the entire decade ahead.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
My Favorite Murder with Karen Kilgariff and Georgia Hardstark
My Favorite Murder is a true crime comedy podcast hosted by Karen Kilgariff and Georgia Hardstark. Each week, Karen and Georgia share compelling true crimes and hometown stories from friends and listeners. Since MFM launched in January of 2016, Karen and Georgia have shared their lifelong interest in true crime and have covered stories of infamous serial killers like the Night Stalker, mysterious cold cases, captivating cults, incredible survivor stories and important events from history like the Tulsa race massacre of 1921. My Favorite Murder is part of the Exactly Right podcast network that provides a platform for bold, creative voices to bring to life provocative, entertaining and relatable stories for audiences everywhere. The Exactly Right roster of podcasts covers a variety of topics including historic true crime, comedic interviews and news, science, pop culture and more. Podcasts on the network include Buried Bones with Kate Winkler Dawson and Paul Holes, That's Messed Up: An SVU Podcast, This Podcast Will Kill You, Bananas and more.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.