By Tetsushi Kajimoto

TOKYO (Reuters) -Japan aims to raise average minimum wages to 1,000 yen ($9) an hour as soon as possible, Prime Minister Yoshihide Suga said on Friday, a move likely to provoke stiff opposition from small and mid-size firms that are struggling during the COVID-19 pandemic.

The effort comes at a time when such firms are battling for survival, while policymakers are counting on wage hikes to sustain a recovery from the accompanying downturn.

“We are aiming to bring minimum wages to a national average of 1,000 yen sooner,” Suga told a meeting of his top economic advisory panel, but did not set a timeframe.

The prime minister’s private sector advisers called for higher minimum wages to boost private consumption that accounts for more than half of Japan’s economy.

The four advisers at the Council for Economic and Fiscal Policy also urged the government to stick to its budget-balancing target as massive coronavirus-related spending has strained the industrial world’s heaviest public debt burden.

Their proposals could be reflected in the government’s mid-year policy guidelines, which will serve as the basis for next fiscal year’s budget, to be compiled in late December.

If the economy moves towards normal, with the help of vaccinations, real GDP is expected to return to pre-pandemic levels as early as this autumn, the advisers said.

However, downside risks warrant close attention, they added, as a third state of emergency was declared for the capital, Tokyo, and some other areas in late April and has been extended until the end of this month.

The advisers said pay increases, including minimum wages, should give a boost to sustainable growth and prevent poverty, particularly among low-paid non-regular workers – many of whom are part-timers and contract workers.

Minimum wages had risen 3% on average a year from fiscal 2017 to 2019 to stand just above 900 yen, but stopped rising last fiscal year as the pandemic hit corporate profits.

Japan’s three pandemic-specific packages amounted to $3 trillion. It aims to balance a primary budget, excluding new bond sales and debt servicing costs, by the end of the fiscal year in March 2026, to improve dire public finances.

($1=109.3300 yen)

(Reporting by Tetsushi Kajimoto; Editing by Gerry Doyle and Clarence Fernandez)