Early signs of a strong outcome in this year’s annual wage talks have heightened the chances that the Bank of Japan (BOJ) would end its negative interest rate policy next week, three sources familiar with its thinking said.
The central bank is likely to scrutinize a preliminary survey on the wage talks’ outcome, to be released by the Japanese Trade Union Confederation tomorrow, before deciding whether conditions to phase out stimulus have fallen into place, the sources said.
This year’s annual wage talks started yesterday, with Toyota Motor Corp agreeing to give factory workers their biggest pay increase in 25 years, heightening expectations that other companies would follow suit with bumper wage increases.
Photo: EPA-EFE
“There seem to be enough factors that justify a March policy shift,” one of the sources said.
“In the end, it will be a judgement call by the nine board members,” the source said, speaking on condition of anonymity due to the sensitivity of the matter.
BOJ Governor Kazuo Ueda signaled the bank’s readiness to phase out its massive stimulus as soon as next week, pointing to “fairly high pay demands” made by labor unions.
“The outcome of this year’s annual wage negotiation is critical” in deciding the timing of an exit from massive stimulus, Ueda told parliament yesterday.
“We’re seeing many companies make offers, including today. We hope to reach an appropriate decision looking comprehensively at these results,” as well as other data, he added.
Many market players expect the BOJ to end negative rates either at its two-day meeting concluding on Tuesday next week, or a subsequent meeting next month.
An end to negative interest rates, which have been in place since 2016, would mark a landmark shift away from the BOJ’s massive stimulus program and Japan’s first interest rate hike since 2007.
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