(Bloomberg) -- Bank of Japan Governor Kazuo Ueda and his board have one more day to decide if it’s time for the nation’s first interest rate hike in 17 years...
-- Bank of Japan Governor Kazuo Ueda and his board have one more day to decide if it’s time for the nation’s first interest rate hike in 17 years, as speculation builds that it will proceed.
There was no unanimous view even inside the bank as recently as early last week, according to people familiar with the matter. That was before the federation of unions, Rengo, announced on Friday that its members had secured wage increases of 5.28% on average, far above the 4.1% predicted by economists surveyed by Bloomberg, and marking the biggest gains in more than 30 years.
Worker pay gains play a critical role as the BOJ pursues a goal of achieving 2% sustainable inflation. Increases that outpace inflation could be the catalyst that sets in motion a virtuous cycle in which wage growth feeds into demand-led price gains. Since taking the helm in April last year, Ueda has proven to be a nimble operator. Within about six months, he eliminated the biggest headache of the current policy framework by adding flexibility to the yield curve control mechanism on two occasions. That pre-empted the sort of massive bond selloff seen in Australia when the Reserve Bank of Australia made adjustments in 2021.
Whenever the negative rate goes away, one thing is abundantly clear: Policy settings will remain accommodative. Ueda and his fellow board members have reiterated this point a number of times in an effort to prepare the market for what’s coming.
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