“The pace is not such that we need to increase interest rates each time.”
Beyond assessing the impact of tariffs on Japan’s economy, the BoJ may also want to:
- Evaluate the effects of the January rate hike on household spending and underlying inflation.
- Consider the outcome of the spring wage negotiations and the potential impact on consumption and inflation.
Last week, Japan’s Rengo, the leading national trade union center, secured a 3.84% base pay rise, below its 4.51% target. Additionally, Rengo achieved a 5.46% average pay rise, below its demand of 6.09%.
Despite falling short of demands, base pay and average pay rises accelerated from last year’s 3.7% base pay rise and 5.28% average pay hike. This upward trend may fuel hopes that higher wages could boost consumer spending, supporting a more hawkish BoJ rate path.
Following Rengo’s updates, investors should track BoJ commentary on Monday, March 17. Support for a near-term rate hike could drag the USD/JPY pair toward the March 11 low of 146.537. Conversely, calls for caution amid Trump’s tariff policies fueled uncertainty could push the pair above 150.
Expert Views on Wages and Inflation
East Asia Econ, a research service specializing in the markets and macro of China, Japan, Korea, and Taiwan, commented on the Shunto 2025 results: