(Bloomberg) -- The Bank of Japan indicated it remains on track to consider more interest rate hikes by upgrading its assessments for two regional economies, while also offering little evidence of any need for immediate action.
The BOJ raised it economic assessments for the Hokuriku and Tokai regions in its quarterly regional report Monday. In a separate release summarizing the views of branch managers who met to discuss the report, the bank said many reported widening perceptions among business leaders that wages need to keep rising next year.
The BOJ is widely expected to hold its policy settings steady when it next sets policy on Oct. 31, and some economists pushed back their forecasts for a year-end hike after new Prime Minister Shigeru Ishiba noted last week - in his first day on the job — that conditions aren’t ripe for such action.
Monday’s report serves as a reminder that a hike remains on the table further down the road. The report likely offers encouraging news for Governor Kazuo Ueda, who has reiterated that the degree to which wage growth spreads is a key point that will help determine the path of borrowing costs.
Rengo, Japan’s biggest umbrella group for labor unions, this month will compile its basic stance for a next year’s spring wage negotiations. BOJ watchers will be monitoring that development closely. This year’s wage talks wound up being a big factor that prompted the BOJ to end the world’s last negative interest rate in March. A few days before that decision, Rengo reported initial results from the wage bargaining sessions.
Nothing in Monday’s report hinted at immediate policy action. After meeting with Ishiba at the prime minister’s office last Wednesday, Ueda said the bank has ample time to assess economic conditions before mulling its options.
Politics is another factor encouraging authorities to stand pat this month. Ishiba is expeted to dissolve parliament this week, laying the groundword for a national election on Oct. 27.
Economists will pay close attention to how Ueda characterizes the outlook four days later when he briefs the press after the board’s decision. Today’s report adds to recent economic data showing that Japan’s recovery is underway.
“All nine regions reported that their respective economies have been recovering moderately, picking up, or picking up moderately, although some weakness was seen in part,” the BOJ said in the regional report.
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