The Bank of Japan (BOJ) is expected to end its negative interest rate policy on Tuesday (Mar 19) on substantial wage hikes by big firms in this year’s wage negotiations, the Nikkei newspaper reported on Saturday.

The BOJ began coordinating both within and outside the bank on Friday on ending its negative interest rate policy, the economic daily said.

Japan’s biggest companies agreed to raise wages by 5.28 per cent for 2024, the heftiest pay hikes in 33 years, the country’s largest union group said on Friday.

This year’s wage hikes “are of a level that even reflationists who are cautious about modifying monetary policy would accept a change in policy”, the Nikkei cited one BOJ source as saying.

BOJ officials, including governor Kazuo Ueda, have recently stressed the timing of a shift away from negative rates would depend on the outcome of this year’s annual wage negotiations between workers and employers.

Sources have told Reuters the BOJ will debate ending its negative rates next week if Friday’s preliminary survey on big firms’ wage talks outcome yield strong results.

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Friday’s bigger-than-expected pay hikes have significantly heightened the chance the BOJ will end eight years of negative interest rate policy next week, marking a landmark shift away from its huge stimulus programme.

“With markets pricing in a March action, there’s no reason for the BOJ to delay the decision until April,” a government source with knowledge of the BOJ’s deliberations told Reuters.

“It’s probably better for the BOJ to act sooner rather than later,” said another senior government official who has regular interaction with incumbent BOJ officials.

The BOJ was not available to comment as it is in a black-out period, when its officials are prohibited to speak to media.

A Reuters poll taken in March showed 35 per cent of economists expected the BOJ to end negative rates at the two-day meeting ending on Tuesday, up from the previous month’s 7 per cent but still below 62 per cent projecting such action at its subsequent meeting on Apr 25 to 26. REUTERS