Discussions on a hike in Japan’s minimum wage for fiscal 2026 entered the final stage at a labor ministry panel Monday, but the gap between the labor and management sides remains wide.

Members from the labor side at the Central Minimum Wages Council have demanded that the nationwide average hourly wage of ¥1,121 ($6.85) be raised by ¥75. The size of the requested hike is larger than fiscal 2025’s record increase of ¥63.

Behind the demand are rising prices as well as robust pay hikes agreed on in this year’s shuntō spring labor-management negotiations.

Those representing the management side see the need to raise the minimum wage but at the same time are calling for careful discussions as business conditions for smaller companies have deteriorated due partly to the soaring cost of procuring materials due to the Middle East turmoil.

Because higher costs have not yet been fully passed on to consumers, whether smaller firms can cover potential hikes in the minimum wage should be carefully assessed, they argued.

Japan’s minimum wage is revised every fiscal year based on living costs, wage levels and companies’ abilities to pay. Relevant prefectural councils determine their respective minimum wage levels after the central government council comes up with its recommendation.