Will the BOJ hike interest rates in March? Analysts weigh in

investing.com:

Investing.com-- The Bank of Japan is set to conclude a two-day meeting this coming Tuesday, with markets focused squarely on whether the central bank will mark an end to its ultra-dovish policies by raising interest rates.

Speculation over a pivot by the BOJ grew rapidly over the past two weeks, especially as the two main factors outlined by the central bank for it to consider tightening policy- chiefly strong wage growth and steady inflation- now appeared to be coming into play.

Negotiations between major Japanese employers and labor unions showed that Japanese workers won bumper wage hikes for 2024. This development came as the country saw signs of sticky inflation in February, which remained above the BOJ’s 2% annual target.

Higher wages are also expected to further underpin inflation, giving the BOJ more impetus to hike rates sooner. This notion was further reinforced by Finance Minister Shunichi Suzuki stating that Japan’s economy was no longer in deflation, and that a trend of higher wages was taking hold. 

Any hikes by the BOJ will be the bank’s first such move since 2007. 

General consensus was that an April rate increase appeared more likely, but that it would be a close call, given that wage and inflation conditions gave the BOJ enough headroom to begin hiking rates this month.

“The BoJ may remove its (negative interest rate policy) and tweak some of its other unconventional monetary policy tools next week. If it doesn’t hike then it seems certain to do so in April. We are leaning to April as this is when it updates its economic outlook,” ANZ analysts wrote in a note, stating that the BOJ will have more information on wages and the Japanese economy in April.

ING analysts also leaned more towards an April move,