Base salaries for regular workers in Japan rose by a record figure, a further indication of progress toward a positive economic cycle that will support market speculation of a near-term rate hike by the central bank.

Base pay for full-time workers increased by 2.8% in October from a year ago, the biggest gain for comparable data back to 1994, the labor ministry reported Friday. Real cash earnings remained unchanged, avoiding a decline for the first time in three months and beating economist estimates of a decrease.

Growth in nominal wages for all workers accelerated to 2.6% from 2.5% the previous month, matching estimates. A more stable measure of wage trends that avoids sampling problems and excludes bonuses and overtime showed wages for full-time workers increased by 2.8%.

Market participants are monitoring wage trends, a key determinant for achieving a positive economic growth cycle, in an attempt to predict the Bank of Japan’s next interest rate hike timing. The yen was largely unchanged after the report.

Economists and market players remain split over whether the central bank will raise rates in December or January. The central bank is scheduled to deliver its next policy decision on Dec. 19.

"We can judge that data so far has been on track and supports a BOJ rate hike though the bank will also consider other data including data from the U.S.," said Ayako Fujita, chief Japan economist at JPMorgan Securities. Fujita sees the BOJ moving in December.

BOJ Gov. Kazuo Ueda reiterated in an interview with the Nikkei newspaper last weekend that authorities would raise rates if the economy performs as projected. He went further to state that the timing for a hike is "nearing,” as economic data remains on track.

"Together with Tokyo’s latest solid inflation data, the wage report adds to signs that conditions are falling into place for the BOJ to resume increasing rates — in January, in our view," said Taro Kimura, economist at Bloomberg Economics.

In less encouraging news for the central bank, household spending continued to fall from last year’s levels, dropping 1.3% in October, indicating that the follow through from wages into consumer spending still remains patchy. Uneven real wage gains that weigh on consumption may limit Japan’s economic recovery.

During the Nikkei interview, Ueda also said he would like to observe the momentum of next year’s spring wage negotiations. The pay talks have started on an optimistic note, with labor unions setting ambitious targets similar to this year’s.

Japan’s largest trade union federation Rengo continues to push for at least a 5% wage hike across industries, with even higher targets for smaller firms, while the metalworkers’ union has requested a record pay increase of ¥12,000 ($79.82) per month.

"With the current momentum and the tight labor market, there is not much of a choice but to raise wages for businesses," Fujita said.

Japan’s job market has been tight with unemployment rate remaining below 3% over three years, keeping pressure on companies to raise wages to retain workers. Worker’s share of corporate profit also dropped to a record low last fiscal year, implying that firms should have some room to spend more on employees.

To address both wage growth and inflation, Prime Minister Shigeru Ishiba unveiled a ¥21.9 trillion economic package last month. For wage-related measures, the government will help fund investments to improve working conditions at smaller firms and promote fair business practices that allow smaller companies to pass rising costs onto corporate customers.

To alleviate price pressures on households, the government plans to extend subsidies for gas and electricity bills through March, and provide cash handouts to low-income families.

Last week Ishiba met with business and union leaders to stress his call for continuous wage hikes in upcoming negotiations. He also instructed Cabinet ministers to come up with a plan by next spring to ensure the minimum wage keeps rising.

"Ishiba’s economic measures including the extension of utility subsidies will create an environment that will make it easier for real wages to rise quickly by slightly curbing inflation," said Fujita, "I think this will underpin consumer spending to a certain extent."