The Bank of Japan kicks off its two-day policy meeting on Thursday.
Policymakers are considering raising interest rates to a level not seen in 30 years.
The benchmark rate has been kept at around 0.5 percent for six straight sessions amid uncertainty over the impact of US tariff policy on Japan’s economy.
Analysts expect the central bank to raise the policy rate to around 0.75 percent. This would mark the highest level since September 1995.
The bank now says the tariff effects were not as far-reaching as expected.
It intends to base its policy decision on wage trends ahead of next spring’s annual labor negotiations.
Policymakers are now more optimistic about wage hikes. This view is based on labor unions’ demands for the spring talks and a BOJ survey showing that many business leaders are backing pay increases.
The quarterly Tankan survey released earlier this week also showed steady business sentiment.
In financial markets, long-term interest rates have risen to nearly 2 percent amid speculation that the policy rate may continue to be hiked in phases.
The focus will also be on BOJ Governor Ueda Kazuo’s outlook for future policy to be revealed at a news conference following the two-day meeting.
AloJapan.com