
Bank of Japan Deputy Governor Ryozo Himino recently indicated that there is a potential for the central bank to increase interest rates during the upcoming Policy Board meeting. This suggestion comes in light of reports signaling that there may be further pay raises for employees in the near future, as corporate executives have been expressing a more positive stance towards increasing salaries.
During a news conference held in Yokohama, Himino highlighted the optimistic signals conveyed by corporate leaders regarding the prospect of salary hikes, particularly in comparison to the previous month. The Deputy Governor's statements align with BOJ Governor Kazuo Ueda's earlier remarks, where he mentioned that any decision about a potential interest rate hike would be influenced by the momentum of salary negotiations during the upcoming spring labor talks and the economic policies to be pursued by the incoming U.S. President, Donald Trump. The anticipation for Trump's inauguration on January 20 adds another layer of significance to the BOJ Policy Board meeting scheduled for January 23-24, where the decision on interest rates will be a key focus.
Himino's observations are rooted in the broader economic context, considering the BOJ's shift from an ultra-loose monetary policy in March to its initial interest rate hike in 17 years. Despite the previous rate adjustments in July, the central bank has maintained a relatively stable interest rate target in the subsequent Policy Board meetings. The ongoing discussions within the BOJ and Himino's emphasis on the significance of wage increases stem from the current labor market dynamics, which face challenges due to labor shortages and the recent increase in the national minimum wage. These factors have fostered expectations for positive outcomes akin to those seen in fiscal 2024, as noted by Himino. Additionally, Himino underlined the increasing likelihood of the central bank reaching its inflation target of 2 percent, pointing towards a potential alignment between economic indicators and policy decisions.