Ueda: Spring wage talks crucial for BOJ inflation outlook

BOJ Governor Kazuo Ueda offered additional remarks during his press conference.

• The bank is focusing on wage negotiations for fiscal year 2027.
• The outcome of spring wage talks in FY2027 will be crucial for assessing if trend inflation becomes sustainable.
• Ueda said the BOJ must avoid the adverse consequences of a sharp rate increase.
• He also stressed the importance of preventing overly rapid tightening from harming financial conditions.
• The vote result today emerged from constructive debate among board members, he noted.
• The BOJ will not adjust its policy based on concerns about future board membership.
• Close coordination with the government is essential, Ueda added.
• The central bank will maintain policy in accordance with the BOJ law, he said.

His emphasis on wage negotiations is expected, as such talks are at the heart of the BOJ's next policy moves. In the previous fiscal year, this focus also proved to be a double-edged sword.

The central bank preferred to delay tightening until it had solid proof of increasing wage pressures from the spring negotiations.

Although preliminary figures indicated trends in February and March, the BOJ held off until June. By that time, the economy had suffered from rising oil prices linked to the US-Iran conflict, along with a "bad" mix of cost-push inflation seeping in.

Thus, Ueda's renewed focus on wage talks could disappoint yen bulls who anticipated faster rate hikes.

Ueda did not dwell on the dissenting votes from Asada and Sato during the press conference. He made it clear that the BOJ will proceed regardless of potential changes in board composition, such as the departures of Naoki Tamura and Hajime Takata in July next year.

These departures give Prime Minister Sanae Takaichi another chance to appoint new members, following Asada and Sato. This could tilt the BOJ further toward a dovish stance by the same time next year.