BOJ Seen Keeping Policy Ultra-Easy, Focus On Rate-Hike Hints

• The Bank of Japan is likely to maintain its ultra-loose monetary settings next week, putting the focus on any hints Governor Kazuo Ueda drops about when the central bank will boost short-term interest rates out of negative territory.
• As many policymakers want to spend a few more months determining whether wage increases will broaden enough to keep inflation sustainably at the BOJ's 2% target, markets now expect a rate hike in March or April at the earliest. However, while the BOJ likely has its eyes set on ending negative rates, people familiar with the central bank's thinking said there were plenty of benefits to holding fire at least until its April 25-26 meeting.
• Surveys and comments from business lobbies have shown an increasing chance Japan's spring wage hikes will be above last year's 30-year high of 3.58% for major firms - a key prerequisite Ueda has set for exiting ultra-loose monetary policy, which is an outlier among major central banks.
• Many BOJ policymakers want to check whether the increases will become more widespread and prod companies to pass on higher labour costs via price hikes, particularly for services. This is in line with a Reuters poll of analysts, who unanimously forecast the BOJ would keep its short-term interest rate target at minus 0.1% and the 10-year government bond yield around 0% at the two-day meeting ending on Tuesday.
• With easing cost-push pressure slowing inflation back towards its 2% target, the BOJ can afford to await more data, such as the outcome of the annual wage talks between big firms and unions in mid-March, said the sources, asking not to be identified because of the sensitivity of the matter.

 (Source: Reuters)