Bank of Japan (BOJ) governor Kazuo Ueda said the ongoing annual spring wage negotiations between companies and unions are critical in deciding when to phase out its massive stimulus programme.

The central bank will consider tweaking its policy framework that comprises a negative interest rate, bond yield control and other tools, if sustained achievement of its 2 per cent inflation target comes into sight, Ueda told Parliament on Wednesday (Mar 13).

“The outcome of this year’s annual wage negotiation is critical” in deciding on the timing of an exit from massive stimulus, Ueda said.

“Labour unions have made demands for fairly high pay. We’re seeing many companies make offers, including today. We hope to reach an appropriate decision looking comprehensively at these results,” as well as other data, he added.

The remarks come ahead of the central bank’s policy meeting next week, where the board will debate whether the outlook is bright enough to end its negative interest rate policy in place since 2016.

Toyota Motor agreed to give factory workers their biggest pay increase in 25 years on Wednesday, heightening expectations that bumper pay raises will give the central bank leeway to make a key policy shift next week.

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Sources have told Reuters a growing number of BOJ policymakers are warming to the idea of ending negative rates at the Mar 18-19 meeting on expectations of hefty pay hikes in this year’s annual wage negotiations. REUTERS