The opening of a Costco branch in a small country town north of Tokyo last year had a significant impact on the local economy and potentially on Japan as a whole. The U.S. retail giant offered a minimum wage of 1,500 yen, or nearly $10 per hour, which was 60% higher than the surrounding area and even competitive in Tokyo. This move forced local businesses to rethink their wage structures to remain competitive.
Takehiro Ehashi, a marketing manager at a nearby noodle shop, decided to increase wages to compete with Costco. While the cost of raw materials already posed a challenge, the increase in hourly pay was necessary to attract and retain workers. Ehashi acknowledged that Costco’s presence had drawn in more customers, ultimately benefiting his business.
Economists view this wage competition as a positive sign. If higher salaries at foreign companies lead to local businesses raising wages as well, it could initiate a cycle of increasing wages and consumption. This would be a significant development in a country where real wages saw minimal growth over several decades.
For workers like Ryu Kawane, the stability of a higher wage at Costco provided a sense of security that was missing due to income fluctuations during the COVID-19 pandemic. Prime Minister Fumio Kishida has emphasized the importance of sustainable wage increases, while the Bank of Japan is monitoring these developments closely.
While some local businesses have voiced concerns about the pressure to raise wages and compete for workers, town mayor Motosuke Tomizuka highlighted the positive impact of Costco on the area. The increase in wages across the region has led to economic revitalization and growth.
With plans to open more stores in Japan, Costco’s influence on wage standards and consumption could have far-reaching effects. Other foreign companies, like IKEA, are also offering competitive wages, signaling a potential shift in the country’s labor market. The government hopes that these changes will lead to long-term economic growth and prosperity.