BOJ Will Exit Negative Rates This Week

The Bank of Japan is expected to make its first pivot on policy rates to a positive territory for the first time in 17 years this Tuesday, according to the Nikkei newspaper.

The most anticipated economic data in Japan came Friday last week as Japan’s biggest companies agreed to raise wages by 5.28% for 2024, which would be the heftiest pay raise in 33 years in Japan.

The BOJ Governor Kazuo Ueda has said several times before that the timing to exit negative rates or shifting stance would depend on the outcome of this year’s annual wage negotiations.

In the report, the Nikkei cited a source from the BOJ, stating that a rise in wage last Friday was a level that “even reflationists who are cautious about modifying monetary policy would accept a change in policy”.

Japan’s central bank will meet on March 18-19 to discuss the country’s policy rates.

Following the wage raise, Goldman Sachs is now also expecting the Bank of Japan to exit the negative rates this week as well, adding that the central bank did not come out to deny the news even after several media outlets started to report the expected shift.

Goldman Sachs noted that these developments imply that the Bank of Japan probably no longer needs to access more data for the policy change, nor to wait to justify the policy change with the quarterly Economic Outlook report in April.