- Tight labour market, firmer wages will keep in place cycle in which wages and prices rise in tandem
- Temporary freeze to food sales tax may briefly push down inflation
- But it is likely to have a limited impact on inflation expectations as a whole
- BOJ will guide monetary policy appropriately to stably achieve inflation target accompanied by wage gains
He's mostly commenting after we got the initial outcome of the spring wage negotiations. From yesterday: Japan's largest union group Rengo sees average wage hike of 5.26% this fiscal year
That will mark the third straight fiscal year in which Japan sees average wage hikes of above 5%. That pretty much gives the green light and confirmation to the BOJ if they so desire to act. However, the US-Iran conflict has served to complicate things more so than it already was before.
The BOJ was already squaring off against prime minister Takaichi in pursuing a differing policy path that the government wants. So, the latest developments in the Middle East piles on top of that now.
As Ueda mentions, the central bank wants inflation to be largely driven by stronger wage pressures. However, higher oil prices now will serve to bring up cost-push inflation instead. And that is something that the BOJ wants to actively avoid from happening or at least not rely on to push the rate hike narrative.
Besides that, USD/JPY bordering on the 160 mark will also make a rate hike look like one just to address the yen weakness. And that will be another play on optics that Ueda & co. will be hoping to side step for the time being.
