By Leika Kihara
MATSUE, Japan (Reuters) -Bank of Japan (BOJ) board member Junko Nakagawa said the economy was making steady progress towards achieving the central bank's 2% inflation target, signalling her conviction that conditions for phasing out its massive stimulus were falling into place.
Faced with intensifying labour shortages, companies appear to have resumed their practice of increasing pay annually, and will likely offer wage increases exceeding those of last year, Nakagawa said.
«We can say that prospects for the economy to achieve a positive cycle of (rising) inflation and wages are in sight,» Nakagawa said in a speech on Thursday.
«There are clear signs of change in how companies set wages. Japan is moving steadily towards sustainably and stably achieving our 2% inflation target,» she said.
The remarks follow those of fellow board member Hajime Takata, who said last week Japan was finally seeing prospects it could durably achieving the bank's 2% inflation target.
With inflation exceeding the BOJ's target for well over a year and prospects for sustained wage gains heightening, many market players expect the central bank to end its negative interest rate policy this month or in April.
Wary of various economic uncertainities, Nakagawa said she would scrutinise various information «without any preset idea in mind,» in reaching a decision on whether to phase out the BOJ's monetary stimulus tools.
«If we judge that achievement of our price target is in sight… we will debate and decide whether or not to modify our policy means including yield curve control and risky asset buying,» Nakagawa said.
In an effort to reflate growth and keep inflation sustainably around 2%, the BOJ guides short-term interest rates at
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