Sources said that since this year's annual salary negotiations are expected to see large salary increases, more and more Bank of Japan policymakers are positive about ending negative interest rates this month.
The Zhitong Finance App learned that four sources said that since this year's annual salary negotiations are expected to see a sharp salary increase, more and more Bank of Japan policymakers are taking a positive attitude towards ending negative interest rates this month. Sources said that after ending negative interest rates, the Bank of Japan may also completely reform its large-scale stimulus plan.
But the March rate hike was not a foregone conclusion. The sources said that nine members of the Bank of Japan have yet to reach a consensus on whether to raise interest rates at the March 18-19 meeting or at least postpone it until the April 25-26 meeting.
Many Bank of Japan policymakers are closely watching the results of the annual salary negotiations between large companies and trade unions on March 13, as well as the first survey results to be announced by the Japan Federation of Labor (Rengo) on March 15 to decide when to gradually withdraw from the large-scale stimulus plan.
Sources said that a sharp salary increase may increase the possibility that the Bank of Japan will raise interest rates in March, as wage adjustments by large companies usually set the tone for the remuneration of small companies across the country.
The Bank of Japan hopes that steady wage growth will spur consumers to spend more, thereby boosting demand and prices after years of economic stagnation and deflation.
“If the spring salary negotiations are strong, the Bank of Japan may not necessarily have to wait until April,” one of the sources said. Another source shared this view.
However, they said that if many members of the committee would prefer to wait for next month's “short-sighted” business confidence survey and the Bank of Japan's regional branch manager's report on national wage prospects before making a decision, then the Bank of Japan may postpone the interest rate hike until April.
If the majority of the nine members of the Bank of Japan vote in favor of ending negative interest rates, it will pave the way for Japan's first rate hike since 2007.
However, there is still uncertainty about whether the March proposal to end negative interest rates will receive sufficient support, as some members may be wary of withdrawing from negative interest rates at a time when consumption and the overall economy are showing signs of weakness recently.
The yen has been rising against the US dollar because the market is increasingly speculating that the Bank of Japan may soon end negative interest rates and is betting that the Federal Reserve will cut interest rates soon. On Friday, the yen rose to 146.95 yen to the dollar, the highest level since the beginning of February.