Bank of Japan officials are edging closer to raising interest rates and will decide whether to move this month at next week’s policy meeting, with the outcome currently too close to call, according to people familiar with the matter.
A final decision will be made after officials see the initial tally from spring wage talks due Friday, according to the people. A strong result could create the final push for a rate increase in March even as some retain the cautious view that the bank should wait until April to see more data, the people said.
Officials are preparing for both a hike or a hold decision at the March 18-19, according to the people. Regardless of whether the first rate hike since 2007 comes in March or April, the assessment of officials is that the bank is close to liftoff, according to the people.
Some officials believe that with the decision expected to be close, it may come down to Governor Kazuo Ueda to decide in the end with a consensus likely to build around his view, the people said.
In the case of standing pat, officials are mulling if they need to signal that a rate hike is in the pipeline to maintain expectations and limit possible market moves, the people said.
While market speculation has soared for a rate hike this month after a slew of economic data and media reports, April remains the most popular timing for the move among economists surveyed by Bloomberg.
Among the recent positive figures, Rengo, Japan’s largest umbrella group for unions, said its affiliated members demanded an average wage increase of 5.85% this year versus 4.49% a year ago, when the process resulted in a preliminary 3.8% bump.
That was the biggest increase in decades, and if this year’s tally due March 15 comes in well above that figure, the central bank may estimate the strength of wage growth among small businesses even though the report largely reflects results only from large firms, the people said.
At the same time, some officials take the view that the initial Rengo results alone won’t be enough to confirm overall wage trends, and that the bank needs to assess ample data and information available toward the April 25-26 gathering, the people said.
If the BOJ moves this month, the bank could be perceived as hawkish and create unnecessary speculation over additional rate increases, some of the people said.
