By Leika Kihara
WASHINGTON, April 15 (Reuters) - The Bank of Japan may
have scope to tweak its bond yield target this year on growing
prospects the country will see a durable rise in wages, a senior
International Monetary Fund official said on Saturday.
Ranil Salgado, the IMF's Japan mission chief, said the
outcome of this year's "shunto" annual wage talks between big
firms and unions have so far been stronger than expected, a sign
the country's wage dynamics may be changing.
The caveat is whether smaller firms would follow suit in
raising wages, and whether companies will keep increasing pay
next year and beyond, he added.
"Our view is, unless there is a global shock ... even next
year's shunto negotiations should be pretty good," Salgado told
Reuters in an interview on Saturday.
Salgado said the BOJ must keep monetary policy ultra-loose
as sustainable achievement of 2% inflation is not yet in sight.
Once the BOJ has confidence that Japan will see inflation
and wage growth durably accelerate, it can tweak its long-term
interest rate target, he said.
Under its yield curve control (YCC) policy, the BOJ guides
short-term interest rates at the -0.1% level and the 10-year
bond yield around zero with an implicit cap of 0.5%.
As long as the short-term rates remain zero or slightly
negative, the BOJ can keep monetary policy accommodative even if
it tweaks the yield target, Salgado said.
"Our personal view is, yes," he said, when asked whether
conditions could fall in place for the BOJ to tweak the 10-year
yield target this year. "We are advising (the BOJ) pretty much
already to be thinking about it."
With inflation exceeding the BOJ's target and the cost of
prolonged easing increasing, markets are rife with speculation
the BOJ will tweak YCC this year under its new governor, Kazuo
Ueda.
Ueda has said the BOJ must maintain ultra-loose policy,
including YCC, for now as inflation is likely to fall back below
its 2% target as import prices begin to fall.
(Reporting by Leika Kihara; Editing by Paul Simao)
Messaging: leika.kihara.reuters.com@reuters.net))
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.