MNI BRIEF: BOJ: Mixed Wages, Prices May Cloud Rate Hike

The Bank of Japan reported mixed views on wage hikes for fiscal 2026 and on corporate price-setting behaviour, key areas of focus for policymakers, in its quarterly Regional Economic Report released Monday.

Regional firms expressed differing views on wage and price policies. A transportation company plans to maintain high wage levels in fiscal 2026, similar to this year, while a food and beverage firm in the same area intends to limit pay increases amid falling profits.

A food company in Fukushima reported reducing the extent of cost pass-through to selling prices, while a Yokohama supermarket said it needed to lower prices in response to consumers’ growing sensitivity to high costs. A food and beverage firm in Kochi said it planned to raise prices in October to offset higher minimum wages and secure funding for pay increases, noting that previous hikes had not kept pace with purchasing costs.

The findings are likely to overshadow prospects for a rate hike this month, although market expectations for an October move have weakened following the outcome of the ruling Liberal Democratic Party’s presidential election. (See MNI POLICY: BOJ Sees No Need To Rush Rate Hikes)

However, the yen’s recent depreciation to around the 150 level — its weakest in two months — could heighten pressure on the BOJ if it continues, as a weaker currency boosts import prices and inflation. A further decline could also make it easier for the government to support a rate hike, given its emphasis on addressing high living costs. There are also concerns over trade policy impact on future business.