Markets have not been deterred by the fact that Japan has entered into a recession, still indicating a high probability that the Bank of Japan will vote to hike interest rates by 0.1% to exit its long-standing negative interest rate policy.
The Bank’s preconditions for the historic hike involve a “virtuous relationship” between wages and prices. Inflation remains above the 2% target for well over a year now but has dropped in the last two prints, questioning whether price pressures will be able to remain above the 2% target in a sustainable manner.
Wage negotiations are currently underway, with the process supposedly coming to an end in mid-March.
