Conditions in Japan’s labour market stayed tight in June, a development likely to keep sustained upward pressure on wages as companies compete to hire and retain workers, reports The Japan Times, citing the Internal Affairs Ministry. The unemployment rate edged lower to 2.5% in June from 2.6% a month earlier. The Japan Times said economists had expected the reading to hold steady at 2.6%. The number of workers rose by 370,000, with women leading the gains, while those without jobs increased by 20,000.

An ageing and shrinking workforce in Japan has created chronic labour shortages that helped encourage companies to agree to the strongest wage gains in more than three decades in annual spring negotiations with unions. Workers secured pay rises exceeding 5%, according to the final tally by the nation’s largest umbrella group for unions.

“The labour market remains tight,” said Takeshi Minami, an economist at Norinchukin Research Institute. “That will certainly add upward pressure on wages and smaller companies don’t have a choice but to raise wages to secure manpower.”

Also, the labour ministry proposed a record 5% increase in the hourly minimum wage for this fiscal year last week, indicating that wage growth is rippling across a broad range of employment sectors. Meanwhile, the job-to-applicant ratio edged lower month on month to 1.23, meaning there were 123 jobs available to every 100 applicants, marking the lowest reading since March of 2022.