The Bank of Japan said wage hikes were broadening across the economy due to tight labor market conditions, signalling its confidence the country is making progress toward durably achieving its 2% inflation target.

The optimistic assessment, made at the BOJ's quarterly meeting of regional branch managers on Monday, may heighten the case for the central bank to raise interest rates as soon as its next meeting on July 30 and 31.

Separate data showed workers saw their average base pay climb 2.5% in May, the fastest pace in 31 years, suggesting that broadening wage gains will give households more purchasing power and underpin consumption.