The government is intensifying support for “midsize companies,” seen as regional economic drivers, by expanding wage increases and investments in facilities. Focusing on a group of companies often lumped together with large corporations despite their relatively smaller size, the government is launching new subsidy schemes and expanding tax incentives. The year 2024 is pivotal for sustaining wage growth, targeting a positive cycle in regional economies.
A new subsidy for substantial facility investments will be introduced by this spring, targeting companies planning wage increases that exceed the growth rate of the minimum wage. The subsidy is limited to companies with fewer than 2,000 employees, covering investments of over 1 billion yen, with a subsidy of one-third of the investment amount.
The new subsidy, with a total budget of 300 billion yen, targets wage increases exceeding the average growth rate of the minimum wage in the prefecture where the invested facility is located. Under the current system, companies with more than 300 employees, even if they have fewer than 2,000, are classified as large corporations, making support less accessible. This initiative focuses on such “midsize” enterprises.
New subsidies established to support substantial facility investments for companies implementing wage increases exceeding the regional minimum wage growth rate.
In recent years, the wage increase rate gap between large and small businesses has widened. According to the Ministry of Economy, Trade, and Industry, over the past decade, the total wage growth rate of midsize companies was 18%, surpassing that of larger corporations with more than 2,001 employees.
The government aims to create a ripple effect on local SMEs through boosting midsize companies. However, SMEs face challenges in raising wages due to factors like the inability to pass on the cost of raw material price increases.
In November, the Fair Trade Commission published guidelines for companies to encourage fair price pass-through practices. The guidelines request involvement from top management and setting negotiation platforms by purchasers, warning that violation could lead to antitrust law breaches.
A Kansai region SME organization official explained, “While large companies have become more responsive to negotiations for price pass-through due to raw material costs, there’s a lukewarm attitude towards negotiations aimed at securing funds for wage increases.”
Recognizing SMEs’ struggles to secure funds for wage increases, the government and ruling party will revise the “Wage Increase Promotion Tax System” in the 2024 tax reform. The revision will make it easier for SMEs to receive tax benefits.
Concurrently, the government will create tax incentives specifically for midsize companies. Under the tax reform, large companies increasing total wages by more than 3% can deduct 15% of the increase from corporate tax, and 25% for a 4% increase. While these deduction rates will be lowered to 10% and 15% respectively, midsize companies will maintain a 25% deduction for a 4% or more increase.
Additionally, the government has secured a 100 billion yen budget for subsidizing SMEs’ adoption of robots and other labor-saving technologies. Companies achieving a certain wage increase will receive additional subsidies. This initiative aims to address the severe labor shortage in manufacturing and improve productivity, thereby expanding wage increases.