TOKYO: Japan will draw up a plan in June on “new capitalism”, focusing on wage increases, innovation and resolving social problems through support for start-ups, Prime Minister Fumio Kishida said on Wednesday.

“First of all, we will aim to compile guidelines by June with regard to labour market reform including reskilling workers and facilitating labour turnover,” Kishida told a panel tasked with implementing the plan.

Kishida first launched the idea of a “new capitalism” when he became prime minister in 2021, pledging to fix distortions in the world’s third-largest economy, and signalling a shift away from reflationary policy, saying there was no growth without redistribution. He said he called it “new capitalism” because of the need to solve downsides such as widening inequality. By pushing structural wage increases, Kishida said on Wednesday Japan would strive to narrow wage differentials between domestic firms and rivals overseas, while taking different economic situations into account.

Kishida places human capital investment at the core of his growth strategy as rapidly-aging Japan faces an acute labour crunch as its working-age population shrinks.

Under pressure from Kishida, major companies have concluded their annual labour talks with average wage increases of 3.8% for the next fiscal year, the biggest rise in about three decades, although the outlook seems less positive for workers at smaller companies, which account for almost 70% of the workforce.

Salaries have been virtually unchanged since the late 1990s and are now well behind the average for the OECD group of rich countries.