(Dec 15): The Bank of Japan (BOJ) indicated further progress on the wage front, a key consideration that effectively cements the case for a rate hike this week, with a report showing that momentum for pay increases remains intact despite US tariffs.
“Most of the reports from the head office and branches mentioned that firms expected to raise wages in fiscal 2026 at about the same rates as in fiscal 2025, when high wage growth was realised,” the BOJ said in a report on Monday.
Governor Kazuo Ueda earlier this month said the bank will “actively” collect data on wage increases so it can make an appropriate decision on a rate hike at its meeting ending Friday. Monday’s report was the bank’s first of its kind. The positive findings make it easy for Ueda to explain raising the benchmark to 0.75%, as all 50 economists surveyed by Bloomberg expect.
The wage report comes after the BOJ’s quarterly Tankan business survey earlier on Monday showed that sentiment among Japan’s largest manufacturers improved for a third straight quarter, hitting the highest level in four years. The reading for non-manufacturers stayed near the highest level since the early 1990s.
Most firms seem to feel it’s necessary to raise wages as much in fiscal 2026 as in fiscal 2025, the BOJ said in the report, citing corporate views on retaining staff and improving worker motivation amid persistent and severe labour shortages.
Rengo, Japan’s biggest umbrella group for labour unions, reported earlier this year the biggest wage gains in more than three decades resulting from annual negotiations. As that process gets underway again, the fact most branch managers are saying wage increases this year could be about the same suggests the potential for fairly robust results next year.
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Traders see about a 94% chance of a rate increase this week according to pricing in the overnight swaps market.
Uploaded by Tham Yek Lee
