DBS Bank: Bank of Japan Expected to Stand Pat This Week, Shunto Wage Negotiations Are Key

格隆汇 March 16｜The team of economists at DBS Bank stated that the Bank of Japan is likely to keep its policy rate unchanged at 0.75% this week. Strong wage data from January and February, along with stable core inflation, indicate that the reflation process remains on track, supporting the normalization of monetary policy. However, the Bank of Japan may prefer to wait for the results of this year's spring wage negotiations (Shunto) to confirm the sustainability of reflation. A moderate rise in oil prices combined with a weakening yen may provide additional reasons for the Bank of Japan to continue raising interest rates. DBS Bank noted that, on the other hand, a sharp oil price shock could bring stagflation risks and delay further tightening. The bank does not believe that a rate hike in April is a foregone conclusion, but considers June-July to offer a more suitable window.