A woman takes a photo under the sacred cherry tree in full bloom in Tokyo’s Ueno Park. The sacred cherry blossoms herald the early arrival of spring in Tokyo.
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Goldman Sachs now expects the Bank of Japan to raise interest rates for the first time in 17 years at its March meeting this week, bringing forward its previous forecast for an April decision.
The bank’s senior Japan economist Tomohiro Ota noted that wage increases in the annual “Spring Capital” wage talks were stronger than expected, followed by Japanese news reports that the Bank of Japan exited negative interest rates at its March meeting that ended on Tuesday.
“So far, the Bank of Japan has not sent any signal denying the news,” Ohta wrote in a note on Monday. “Taken together, these developments mean the BOJ may no longer need more data to adjust policy, nor will it need to wait for April’s quarterly economic outlook report to justify policy changes.”
While a slim majority of economists still expect the central bank to raise interest rates in April, a growing number have moved their forecasts forward to March in the past two weeks amid signs that wage talks this year will be far stronger than expected .
Ohta said he expects the BOJ to scrap its yield curve control policy, a policy the central bank uses to target long-term interest rates, by buying and selling bonds as necessary. However, he expects the central bank to “not explicitly commit” to the size of its purchases of Japanese government bonds or to stop buying ETFs.
“The Bank of Japan’s overshooting commitment to increase the monetary base may also be scrapped,” he added.
Although the central bank has effectively relaxed its yield curve control policy on long-term interest rates over the past 16 months, it has still kept interest rates at -0.1% and maintained the cap on the 10-year Japanese government bond yield at 1%. A reference.
While Bank of Japan Governor Kazuo Ueda meets with the other eight board members eight times a year, the central bank Update on economic outlook Only four times: January, April, July and October.
virtuous spiral
Ueda has repeatedly said that the outcome of this year’s wage negotiations will be a key factor in ensuring sustainable price increases. The Bank of Japan expects rising wages to lead to a virtuous spiral, leading to inflation fueled by domestic demand.
Rengo, Japan’s largest trade union federation, said on Friday that workers at Japan’s largest companies will see an average salary increase of 5.28% in fiscal 2024, according to data from Japan’s largest corporate union. first temporary list This year the union is negotiating its formation.
Workers at small companies are expected to receive an average raise of 4.42%, and Rengo members’ base salaries will also increase by an average of 3.7%.These figures exceed last year’s gains The most dramatic spike in three decades.
Although “core core inflation” (excluding food and energy prices) has exceeded its 2% target for more than a year, the Bank of Japan has made few changes to its current ultra-easy monetary policy stance implemented in 2016.
If the Bank of Japan moves to eliminate the world’s last remaining negative interest rate regime, it would mark the end of its decades-long monetary policy experiment aimed at weaning the world’s fourth-largest economy from deflation.
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