Overview
## 1. Report Overview
This report presents the results of the "National Small and Medium Enterprise Business Conditions Survey (April-June 2025 Special Survey)" published by the Shinkin Central Bank Research Institute on July 1, 2025. The survey targeted small and medium enterprise (SME) managers nationwide and revealed that 21.3% of respondents indicated they "expect to implement" employment and working hour reductions in response to the government's goal of achieving a minimum wage of 1,500 yen by the mid-2020s. The survey results provide important insights into how SMEs are responding to wage increase pressures and the impact of these responses on employment. In particular, it highlights the severity of the impact of rising labor costs on SME management, which typically have higher labor distribution rates compared to large enterprises.
## 2. Key Points
The most important finding revealed by the survey is that 21.3% of SMEs responded they "expect to implement" employment adjustments in response to minimum wage increases. Furthermore, 41.2% of companies responded "don't know," while only 37.5% clearly stated they "do not expect to implement" employment adjustments. These results indicate that the government's target of a 1,500 yen minimum wage by the mid-2020s has become a significant management challenge for many SMEs. Additionally, while many SMEs are attempting to respond through price increases, cost reductions, and labor-saving investments, the harsh reality emerges that these measures alone are insufficient to secure resources for wage increases.
## 3. Response to Minimum Wage Increases
SME responses to minimum wage increases are diversifying. First, an increasing number of companies are attempting to raise sales prices, but many industries and regions face difficulties in price pass-through, making complete transfer challenging. Second, many companies are trying to respond through cost reductions, but in many cases, the scope for further cuts is already limited. Additionally, movements to improve productivity through labor-saving investments are observed, but implementation is difficult for small-scale companies with limited investment capacity. Under these circumstances, the fact that over 20% of companies are forced to consider employment adjustment as a last resort demonstrates the severity of SME management conditions. This trend is particularly pronounced in labor-intensive industries.
## 4. Reality of Employment Adjustments
Looking at the breakdown of the 21.3% of companies that responded they "expect to implement" employment adjustments, the proportion is particularly high among small-scale enterprises by employee size. Specifically, 14.5% for companies with 1-4 employees, 20.7% for 5-9 employees, 25.0% for 10-19 employees, and 28.1% for 20-29 employees, showing a trend where the proportion considering employment adjustments increases with company size. However, companies with 200-300 employees show the highest proportion at 29.1%. Specific methods of employment adjustment are expected to include suppression of new hiring, reduction of non-regular employment, and shortening of working hours, all of which represent important management decisions that could affect companies' growth potential and competitiveness.
## 5. Analysis by Industry and Scale
Industry analysis shows that labor-intensive industries tend to have higher proportions considering employment adjustments. Particularly in service, retail, and food service industries, labor costs account for a high proportion of sales, creating a structure where minimum wage increases directly pressure profits. Meanwhile, while manufacturing industries have relatively more room to respond, many subcontractors face difficulties in price pass-through. By scale, companies with 20-49 employees show the highest proportion considering employment adjustments at 30.0%, indicating that companies in this size range face the most severe conditions. This shows that so-called "mid-sized companies" that are neither too small nor large face a dilemma of being unable to enjoy economies of scale while being required to match wage levels of large companies.
## 6. Progress in Price Pass-Through
Whether SMEs can pass on cost increases from minimum wage hikes to prices is an extremely important factor for management sustainability. Survey results reveal that while price pass-through is partially progressing, complete transfer has not been achieved. Particularly in B2B transactions, many cases report difficulties in price pass-through due to power relationships with large companies. In B2C transactions, concerns about customer loss due to price increases are common given high consumer price sensitivity. While the government is supporting price pass-through promotion through policy, the difficulty of actually achieving transfer within market mechanisms has become apparent. If this situation continues, securing resources for wage increases will become increasingly difficult, potentially leading to more companies implementing employment adjustments.
## 7. Response to Labor Shortages
Ironically, many SMEs simultaneously face labor shortage issues. Companies face the contradictory challenges of needing employment adjustments due to minimum wage increases while also needing to secure human resources for business continuity and expansion. In response to this contradictory situation, companies are forced to focus on improving labor productivity. Specific measures include digitalization and automation investments, business process reviews, and promotion of multi-skilled workers. However, these initiatives require initial investment and time, making them unlikely to provide immediate solutions. As a result, short-term responses center on qualitative employment transformation (such as suppressing conversion from non-regular to regular employment) and adjustments to working hours.
## 8. Impact Analysis on Management
The impact of achieving a 1,500 yen minimum wage on SME management is multifaceted. First, increased labor costs will pressure operating profit margins, potentially reducing resources for capital investment and R&D investment. This could lead to decreased competitiveness in the medium to long term. Second, if employment adjustments reduce the workforce, maintaining and expanding sales becomes difficult. Furthermore, securing talented personnel becomes more challenging, potentially exacerbating business succession issues. While wage increases are expected to have positive effects such as improved employee motivation and expanded consumption, whether these effects can offset the negative impact of increased labor costs remains unclear. Particularly for companies with low value-creation capabilities, business continuity itself may become difficult in some cases.
## 9. Future Challenges and Prospects
For SMEs to adapt to minimum wage increases, several important challenges must be addressed. First, continuous efforts toward productivity improvement are essential. This includes utilizing digital technology, improving operational efficiency, and adding higher value. Second, creating an environment for appropriate price pass-through is necessary. This requires not only individual company efforts but also societal understanding promotion and institutional support. Third, balancing qualitative improvement and quantitative securing of employment is important. Rather than simple employment reduction, productivity improvement through skill enhancement and multi-skilling is necessary. While expansion of government support measures is expected, ultimately each company's efforts toward management innovation will determine success or failure.
## 10. Conclusion and Policy Implications
The survey results clearly demonstrate that the target of a 1,500 yen minimum wage represents an extremely high hurdle for SMEs. The current situation where 21.3% of companies are considering employment adjustments and 41.2% are undecided reveals a significant gap between policy objectives and corporate realities. From a policy perspective, comprehensive support measures are needed beyond simple minimum wage increases, including support for SME productivity improvement, promotion of price pass-through, and reduction of social insurance premium burdens. Additionally, detailed policy design considering regional and industry characteristics is required. Ultimately, cooperation between public and private sectors in addressing the difficult challenge of achieving both wage increases and employment maintenance is essential for realizing sustainable economic growth.
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This summary was automatically generated by AI. Please refer to the original article for accuracy.
1. Report Overview
This report presents the results of the "National Small and Medium Enterprise Business Conditions Survey (April-June 2025 Special Survey)" published by the Shinkin Central Bank Research Institute on July 1, 2025. The survey targeted small and medium enterprise (SME) managers nationwide and revealed that 21.3% of respondents indicated they "expect to implement" employment and working hour reductions in response to the government's goal of achieving a minimum wage of 1,500 yen by the mid-2020s. The survey results provide important insights into how SMEs are responding to wage increase pressures and the impact of these responses on employment. In particular, it highlights the severity of the impact of rising labor costs on SME management, which typically have higher labor distribution rates compared to large enterprises.
2. Key Points
The most important finding revealed by the survey is that 21.3% of SMEs responded they "expect to implement" employment adjustments in response to minimum wage increases. Furthermore, 41.2% of companies responded "don't know," while only 37.5% clearly stated they "do not expect to implement" employment adjustments. These results indicate that the government's target of a 1,500 yen minimum wage by the mid-2020s has become a significant management challenge for many SMEs. Additionally, while many SMEs are attempting to respond through price increases, cost reductions, and labor-saving investments, the harsh reality emerges that these measures alone are insufficient to secure resources for wage increases.
3. Response to Minimum Wage Increases
SME responses to minimum wage increases are diversifying. First, an increasing number of companies are attempting to raise sales prices, but many industries and regions face difficulties in price pass-through, making complete transfer challenging. Second, many companies are trying to respond through cost reductions, but in many cases, the scope for further cuts is already limited. Additionally, movements to improve productivity through labor-saving investments are observed, but implementation is difficult for small-scale companies with limited investment capacity. Under these circumstances, the fact that over 20% of companies are forced to consider employment adjustment as a last resort demonstrates the severity of SME management conditions. This trend is particularly pronounced in labor-intensive industries.
4. Reality of Employment Adjustments
Looking at the breakdown of the 21.3% of companies that responded they "expect to implement" employment adjustments, the proportion is particularly high among small-scale enterprises by employee size. Specifically, 14.5% for companies with 1-4 employees, 20.7% for 5-9 employees, 25.0% for 10-19 employees, and 28.1% for 20-29 employees, showing a trend where the proportion considering employment adjustments increases with company size. However, companies with 200-300 employees show the highest proportion at 29.1%. Specific methods of employment adjustment are expected to include suppression of new hiring, reduction of non-regular employment, and shortening of working hours, all of which represent important management decisions that could affect companies' growth potential and competitiveness.
5. Analysis by Industry and Scale
Industry analysis shows that labor-intensive industries tend to have higher proportions considering employment adjustments. Particularly in service, retail, and food service industries, labor costs account for a high proportion of sales, creating a structure where minimum wage increases directly pressure profits. Meanwhile, while manufacturing industries have relatively more room to respond, many subcontractors face difficulties in price pass-through. By scale, companies with 20-49 employees show the highest proportion considering employment adjustments at 30.0%, indicating that companies in this size range face the most severe conditions. This shows that so-called "mid-sized companies" that are neither too small nor large face a dilemma of being unable to enjoy economies of scale while being required to match wage levels of large companies.
6. Progress in Price Pass-Through
Whether SMEs can pass on cost increases from minimum wage hikes to prices is an extremely important factor for management sustainability. Survey results reveal that while price pass-through is partially progressing, complete transfer has not been achieved. Particularly in B2B transactions, many cases report difficulties in price pass-through due to power relationships with large companies. In B2C transactions, concerns about customer loss due to price increases are common given high consumer price sensitivity. While the government is supporting price pass-through promotion through policy, the difficulty of actually achieving transfer within market mechanisms has become apparent. If this situation continues, securing resources for wage increases will become increasingly difficult, potentially leading to more companies implementing employment adjustments.
7. Response to Labor Shortages
Ironically, many SMEs simultaneously face labor shortage issues. Companies face the contradictory challenges of needing employment adjustments due to minimum wage increases while also needing to secure human resources for business continuity and expansion. In response to this contradictory situation, companies are forced to focus on improving labor productivity. Specific measures include digitalization and automation investments, business process reviews, and promotion of multi-skilled workers. However, these initiatives require initial investment and time, making them unlikely to provide immediate solutions. As a result, short-term responses center on qualitative employment transformation (such as suppressing conversion from non-regular to regular employment) and adjustments to working hours.
8. Impact Analysis on Management
The impact of achieving a 1,500 yen minimum wage on SME management is multifaceted. First, increased labor costs will pressure operating profit margins, potentially reducing resources for capital investment and R&D investment. This could lead to decreased competitiveness in the medium to long term. Second, if employment adjustments reduce the workforce, maintaining and expanding sales becomes difficult. Furthermore, securing talented personnel becomes more challenging, potentially exacerbating business succession issues. While wage increases are expected to have positive effects such as improved employee motivation and expanded consumption, whether these effects can offset the negative impact of increased labor costs remains unclear. Particularly for companies with low value-creation capabilities, business continuity itself may become difficult in some cases.
9. Future Challenges and Prospects
For SMEs to adapt to minimum wage increases, several important challenges must be addressed. First, continuous efforts toward productivity improvement are essential. This includes utilizing digital technology, improving operational efficiency, and adding higher value. Second, creating an environment for appropriate price pass-through is necessary. This requires not only individual company efforts but also societal understanding promotion and institutional support. Third, balancing qualitative improvement and quantitative securing of employment is important. Rather than simple employment reduction, productivity improvement through skill enhancement and multi-skilling is necessary. While expansion of government support measures is expected, ultimately each company's efforts toward management innovation will determine success or failure.
10. Conclusion and Policy Implications
The survey results clearly demonstrate that the target of a 1,500 yen minimum wage represents an extremely high hurdle for SMEs. The current situation where 21.3% of companies are considering employment adjustments and 41.2% are undecided reveals a significant gap between policy objectives and corporate realities. From a policy perspective, comprehensive support measures are needed beyond simple minimum wage increases, including support for SME productivity improvement, promotion of price pass-through, and reduction of social insurance premium burdens. Additionally, detailed policy design considering regional and industry characteristics is required. Ultimately, cooperation between public and private sectors in addressing the difficult challenge of achieving both wage increases and employment maintenance is essential for realizing sustainable economic growth.
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