The BOJ raised its short-term interest rates to around 0% to 0.1% from -0.1%, according to its statement at the end of its two-day March policy meeting.
This represents the sharpest pullback in its decades-old radical policy tinkering in the form of asset purchases and quantitative easing to reflate the world’s fourth-largest economy.
The BOJ had barely budged from its ultra-loose monetary policy posture despite “core core inflation” — which excludes food and energy prices — exceeding its 2% target for more than a year, because policymakers viewed price increases as largely imported.
Ongoing “shunto” spring wage negotiations between Japan Inc and its unionized workers have so far yielded a weighted average 3.7% spike in base pay, Rengo, Japan’s largest federation of trade unions, said Friday in its first provisional update.
BOJ Governor Kazuo Ueda had repeatedly said the outcome of this year’s annual “shunto” wage negotiations would be key to sustainable price increases.
The Bank of Japan expects higher salaries to lead to a virtuous spiral, with domestic demand fueling inflation.
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