A total of 62.1 percent of companies in Japan have raised or plan to raise base pay in fiscal 2023, up sharply from 38.7 percent the previous year as they seek to secure talent and match rising prices, a Finance Ministry survey showed.

The trend was notable particularly in the nonmanufacturing sector, with 56.0 percent saying they have or will raise wages, expanding from 28.8 percent the year before, the survey said. In the manufacturing sector, the figure was at 69.8 percent, up from 52.0 percent.

Tomoko Yoshino (3rd from L), the head of Rengo, or the Japanese Trade Union Confederation, calls for pay hikes in a rally held near the Diet in Tokyo on March 7, 2023. (Kyodo)

Hikes of 3 percent or more were recorded for 37.3 percent of the businesses that have raised base pay or plan to, up from 13.7 percent the previous year.

When asked the reasons for raising wages, including base pay and bonuses, 80.4 percent said they seek "to enhance the motivation of the employees, improve their labor conditions and prevent them from leaving jobs." Some 64 percent said they did so "to respond to rises in commodity prices."

Among the respondents, a medium-sized retailer in western Japan, said, "At a time less people are seeking to work in sales and customer services, we cannot acquire talent unless we improve labor conditions."

The survey targeted around 1,200 companies, comprising some 500 large-sized companies and 700 small- and medium-sized firms, from mid-March to mid-April.

The percentage of firms that have or plan to raise base pay in fiscal 2023 was calculated based on around 1,000 companies as a parameter, excluding companies who did not respond to the question or were unclear.

The pay raises come after Prime Minister Fumio Kishida called on the business community to increase wages to mitigate the financial burden on households hit by soaring prices of everything from food to gasoline.

Consumer inflation in Japan accelerated to 3.0 percent in fiscal 2022 through March, the fastest pace in 41 years, according to government data.

Companies have also been pressured to improve labor conditions to acquire global talent with wages in Japan remaining relatively low compared to other developed countries. Japan's wages are the lowest among the Group of Seven industrialized nations, according to data compiled by the Organization for Economic Cooperation and Development.

The average wage in Japan rose some 6 percent in 2021 from 1990 to $39,711, creating a sharp contrast with the United States, which saw increases of roughly 50 percent during the same 1990-2021 period, the data showed.