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Bank of Japan Governor Kazuo Ueda continues to prepare for the country's first rate hike since 2007 with another round of rhetoric that further makes the case for a rate hike next spring, while not ruling out the less likely option of a January rate hike. "Even if the Bank of Japan does not get the full results of the spring wage negotiations for small and medium-sized enterprises, it is possible that some decisions will be made," Ueda said. ”
Amid a busy week at the Bank of Japan, Ueda's latest comments suggest that the BOJ may not be able to wait until July until the country's largest trade union federation (rengo) compiles more complete data on wage agreements before raising interest rates.
Kazuo Ueda said that the chances of getting enough information to support a policy adjustment at the Bank of Japan's January meeting were not high, but he refused to rule it out. The central banker's comments are likely to support economists' view that the Bank of Japan will act in April. Previously, the Bank of Japan had assessed early annual wage agreement data scheduled for March and confirmed that the Japanese economy is expanding again, with gross domestic product (GDP) data scheduled for February.
Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank, said: "With large companies set to make salary hike decisions in mid-March, Kazuo Ueda's comments yesterday suggest that we are more likely to see the end of negative interest rates in April. ”
Unlike other advanced economies, Japan has long sought to revive economic growth and activity by stimulating inflation. While the Federal Reserve and the European Central Bank aggressively raised interest rates in response to soaring prices, the Bank of Japan insisted on maintaining the world's only remaining negative interest rate policy in an attempt to promote a virtuous cycle of wage**-supported inflation.
Still, this week's remarks, including Kazuo Ueda's speech at Keidanren, suggest that the BOJ is close to making a decision that will effectively end the last negative interest rates that global central banks have left at the moment.
Two-thirds of economists surveyed in early December expect the BOJ to raise interest rates by April. Half of economists also believed at the time that December was the most likely time for a rate hike. The latest overnight swap data shows less than a 10% chance of a rate hike in January and around 89% in June.
Another possibility is a rate hike in March, as Rengo will announce the preliminary results of the annual spring wage talks a week before the BOJ meeting. However, economists believe that a rate hike in April is more likely than in March, as it gives the Bank of Japan more time to observe the initial and subsequent wage results.
The BoJ will also release quarterly economic ** in April, which could be used to support the case for rate hikes. Since taking the helm of the Bank of Japan last year, Kazuo Ueda has adjusted policy at every meeting that releases its quarterly**. The next economic ** is scheduled to be announced in January next year.
Mizuho** strategist Shoki Omori said: "The policy adjustment in January is not in the table. He will focus on the results of the survey in Tokyo, as well as wage trends and income growth in the monthly labor force survey and household survey. ”
Previously, Rengo announced that 805 unions had earned a record 380% salary increase. For the 2024 salary negotiations, Rengo will announce the first results on March 15. The Bank of Japan will announce its decision on March 19. The federation then updated the results several times to reflect the results of small companies. At the beginning of April this year, Rengo released the results of 1,500 companies with fewer than 300 employees. The results will be announced on 4 April 2024. In later statistics, the rate of wage growth usually slows down gradually as the performance of small companies is included in the statistics. The final figure for July fell slightly to 358%。