TOKYO - The Bank of Japan (BoJ) is set to hold a two-day monetary policy meeting starting on Monday, with indications of a willingness to shift its policy once it can foresee achieving its 2% price stability target in conjunction with wage increases.
The market is focused on the timing of this potential policy shift. However, uncertainties remain, such as wage hike trends among small and medium-sized enterprises, and how the BoJ will indicate the direction of its policy is a key point of interest.
The Consumer Price Index has exceeded 2% for 19 consecutive months to the end of last year, and financial markets are keenly watching for when the BoJ will exit its negative interest rate policy.
Last month, in an interview with NHK, Governor Ueda cited two points as key to deciding on a policy shift: wage trends in the spring wage offensive (Shunto) and the spillover effect of wage increases on prices to date. Ahead of the Shunto, major corporations have been announcing wage hikes one after another, but reports from this month's BoJ branch managers' meeting indicate that while the momentum for wage increases is forming earlier than last year, the spread and level of wage hikes, particularly among small and medium-sized enterprises, remain highly uncertain.
In this context, the focus of the upcoming monetary policy meeting will be on how the BoJ will indicate the direction of its policy, taking into account the current wage hike trends. Additionally, the meeting is expected to include discussions on the economic impact of the Noto Peninsula earthquake.
The meeting will coincide with the publication of the "Outlook Report," which will present a three-year forecast for prices. While import prices, such as crude oil, are falling, the government's reduction in financial support for electricity and gas bills and the fixed tax reduction starting in June are expected to push up prices. How these factors will be reflected in the report is also drawing attention.
Source: NHK
