Speculation surged that the Bank of Japan will move this month to raise interest rates for the first time since 2007, after a flurry of reports and wage figures helped drive up the yen, bond yields and overnight swaps.
Bets on the March 18-19 meeting are gaining traction as reports emerge that some BOJ officials favor an early move while some government officials also support a rate hike. Economists and investors are largely in agreement that the central bank will scrap the world’s last remaining negative rate either this month or in April.
The yen rallied more than 1% to a one-month high against the dollar Thursday, while Japanese bank shares and government bond yields rose after the wage data and remarks from a BOJ board member who expressed confidence in inflation. Meanwhile, labor unions made the strongest pay demands in three decades. Volatile overnight swaps put the chance of a March rate hike at nearly 80%.