(Bloomberg) -- The Bank of Japan indicated it sees progress in wage gains, while refraining from giving any clear hints on whether an interest rate hike is coming this month.
“Overall, many chiefs reported that the awareness of the need for sustained wage increases is permeating through a wide range of industries and businesses of various sizes,” the quarterly summary of branch managers’ views released Thursday said. Structural labor shortages and rising minimum pay were behind that changed awareness, it said.
At the same time, the central bank noted continued cautiousness on wage hikes, especially among smaller businesses. Some firms are still monitoring the decisions made by competitors, it also said.
That mix of views kept the report largely balanced, making both January and March seem possible as the next timing for a rate increase. BOJ watchers were waiting for the report for any hints over whether the bank will raise rates this month, as wage growth has become a key focus for the central bank in its pursuit of stable inflation.
But the BOJ kept its options open amid growing uncertainties, particularly due to recent incendiary remarks from President-elect Donald Trump.
Last January, the BOJ said that many branch chiefs reported high uncertainties over the magnitude and spread of wage hikes, particularly among small businesses. Less than two weeks after that, the BOJ kept its monetary easing unchanged, amid intense focus from market players waiting for the central bank to finally end the world’s last major negative interest rate.
Governor Kazuo Ueda has recently repeatedly cited the momentum for the annual spring wage talks as key in considering the fate of the benchmark rate, along with uncertainties over US economic policy. That brought greater attention than usual to Thursday’s branch manager report in gauging the level of the BOJ’s confidence over wage hikes.
In the report, the BOJ also upgraded the economic assessment for two of nine regions, in a hint of continued economic recovery.
“All nine regions reported that their respective economies have been recovering moderately, picking up, or picking up moderately, although some weakness were seen in part,” the bank said.
The report follows government wage data earlier Thursday, showing Japan’s base pay increased by the most in 32 years. That confirms the BOJ’s view that wages are rising, while Ueda has signaled his focus now is what’s going to happen this year.
The next key event for BOJ watchers is a speech and press conference by Deputy Governor Ryozo Himino scheduled for Tuesday. The central bank delivers its next policy decision on Jan. 24.
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