TOKYO: The Bank of Japan started a two-day policy-setting meeting on Monday, seen as likely to decide to end its negative interest rate policy in light of large wage hikes offered by many companies during this year’s “shunto” labor-management negotiations.

The end of the negative rate policy will mark the BOJ’s first interest rate hike in 17 years.

The BOJ is increasingly confident that a virtuous cycle of wage and price growth will be achieved, although some in the central bank are calling for waiting to see whether wage increases will trickle down to small firms.

Currently, the BOJ imposes an interest rate of minus 0.1 pct on financial institutions’ current account deposits at the central bank.

The BOJ is expected to scrap the negative rate and shift to a policy of guiding the uncollateralized overnight call rate to levels slightly below 0.1 pct.

The central bank is also considering abolishing its yield curve control policy, which aims to keep the benchmark 10-year Japanese government bond yield around zero pct.

At the same time, the BOJ is expected to maintain an accommodative policy stance for the time being to ensure that its 2 pct inflation target will be achieved in a sustainable way.

The Japanese government and the BOJ plan to maintain for the time being their January 2013 joint statement, which features the central bank’s 2 pct inflation target.

JIJI Press