BoJ may review its yield-curve control policy

TOKYO: Bank of Japan (BoJ) officials are pondering the question of whether to tweak the settings of the yield-curve control (YCC) programme as domestic long-term interest rates float higher in tandem with those in the United States, according to the Nikkei.

The topic will probably be discussed at the next two-day board meeting that ends Oct 31, with some officials cautious about the idea as they continue to monitor wage trends, the newspaper said.

Speculation over potential changes to BoJ policy has simmered since the central bank surprised markets in July by loosening its grip on long-term rates under the YCC framework.

The yield on Japan’s 10-year government bond reached a fresh decade high at 0.845% last Friday before retracing after the BoJ said it would provide five-year loans to banks.

Governor Kazuo Ueda is closely watching wage hike trends.

The nation’s largest labour union federation, Rengo, began the annual negotiation process by calling for companies to raise pay by at least 5% in principle next year, potentially providing the key element needed for the central bank to move toward policy normalisation.

The talks will culminate in the spring, but some companies have already indicated they’re on board with maintaining wage hike momentum.

Suntory Holdings aims to raise wages by around 7%, with base pay rising by 3%, the Nikkei reported last week, citing president Takeshi Niinami.

Meiji Yasuda Life insurance is looking at a 7% increase in compensation and Bic Camera plans to raise base wages by the most since 2004, NHK reported last week, without attribution.

“However, medium and small companies will have a tough time raising pay by 5%,” Ken Kobayashi, president of the Japan Chamber of Commerce and Industry, said last Thursday, according to TBS.BoJ board member Asahi Noguchi said earlier this month that base pay needs to increase at a pace close to 3% as a trend for the bank’s sustainable price target to be met. — Bloomberg