The welfare ministry report showed the child poverty rate rose to 16.3 percent in 2012, the worst result since the survey started nearly three decades ago and one of the highest levels among the 34 countries in the Organisation for Economic Co-operation and Development (OECD).
The rate measures the percentage of children living in households with an annual net income below the poverty line -- 1.22 million yen ($12,000) per person.
More than half of single-parent families were living below the poverty line, while nearly two-thirds of families with children felt their financial situation was bad or very bad, said the survey which was published Tuesday.
The results highlight a growing wage gap in Japan which has long prided itself as an egalitarian society.
But a weak economy beset by deflation over the past two decades has ushered in a growing number of low-paid contract positions, largely filled by women.
Japan ranked sixth-highest in child poverty in the OECD after Mexico, Israel, Chile, the United States and Turkey.
"This didn't surprise me," said Masato Hirayu, a child poverty activist.
"It is a natural result of the government's inertia in fixing the problem."
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