BoJ’s Ueda Notes Broader Wage Gains, Signals Hike Path

Bank of Japan Governor Kazuo Ueda signaled that conditions for another rate hike are taking shape, citing accelerating wage growth and a tightening labor market.

Speaking at the Fed’s Jackson Hole symposium on Saturday, Ueda said Japan’s long stretch of stagnant pay was rooted in “entrenched deflationary expectations,” but global inflation post-COVID disrupted that equilibrium. “Notably, wage growth is spreading from large enterprises to small and medium enterprises,” he said, adding that “barring a major negative demand shock, the labor market is expected to remain tight and continue to exert upward pressure on wages.” Ueda pointed to rising labor mobility and demographic-driven shortages as key forces pushing firms to raise pay.

Following its exit from ultra-loose policy last year, the BoJ hiked rates to 0.5% in January, held steady in July, and upgraded its inflation outlook—fueling expectations for another increase later this year.