Bank of Japan Edges Toward a Third Rate Hike as Wage Growth Holds
Tokyo's spring shunto delivered another year of meaningful wage gains, giving Governor Ueda the cover to continue normalisation despite a fragile global backdrop.
Rengo, Japan's largest trade union confederation, reported final shunto results showing average wage settlements of 5.1 percent — the second consecutive year above five percent and the strongest sustained run since the early 1990s.
Bank of Japan Governor Kazuo Ueda signalled in a speech to the Keidanren that the data "materially strengthens the case" for continued, gradual policy normalisation. Markets now price a 70 percent probability of a 25 basis point hike at the July meeting.
The yen has rallied roughly five percent against the dollar over the past month, providing welcome relief for import-dependent retailers but creating new pressure for Toyota, Sony and the country's machine-tool exporters.
Domestic equities have nonetheless held their ground. The Topix is up 14 percent year-to-date, supported by record corporate buybacks and the continued dismantling of cross-shareholdings under Tokyo Stock Exchange reforms.
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