The Bank of Japan is expected to raise interest rates early in May? Former monetary policy official pours cold water on this: more likely in June.

Former currency policy official at the Bank of Japan Kazuo Momma said that the Bank of Japan may not raise interest rates again until mid-year. He pointed out that despite recent speculation in the market that the Bank of Japan would raise rates earlier, the Bank of Japan hopes to maintain a pace of raising rates every six months. In an interview on Monday, Kazuo Momma said, "In my view, June is the most popular choice." He added that based on economic and financial market conditions, it "might be delayed until September or later." At the time of Kazuo Momma's remarks, the market speculated that the Bank of Japan could take action in May based on strong economic data. Overnight index futures trading showed that as of Monday, traders believed that there was about a 28% chance of the Bank of Japan raising rates at the May policy meeting, more than double what it was about two months ago. A survey conducted shortly after the Bank of Japan raised rates earlier this year showed that economists believed that July was the most likely month for the Bank of Japan to raise rates next. However, Kazuo Momma believes that the likelihood of an early rate hike is low because it would require clear risks, such as the yen rapidly weakening or stronger results in Japan's annual wage negotiations, which would lead to the Bank of Japan falling behind the curve. Kazuo Momma indicated that the Bank of Japan may stay put at the end of the policy meeting on March 19. He also stated that with US President Trump intensifying concerns about the outlook for the US economy through tariff measures, policymakers at the Bank of Japan may become more cautious, and currently will not give any hints about the timing of the next rate hike. Last week, sources revealed that Bank of Japan policymakers are leaning towards keeping rates unchanged this month as they closely monitor the impact of the January rate hike and the increasing uncertainty in the global economy. Kazuo Momma said that it is unlikely that the Bank of Japan will take action in July because Japanese Prime Minister Shizo Abe is expected to hold a national election. He said that raising borrowing costs would face political uncertainties, and the Bank may have difficulty ensuring adequate communication with the government at that time. He stated, "If there is no rate hike in June, the likelihood of a rate hike in September or later will rise, but there will be no rate hike in July." "It is important that the Bank of Japan maintains its pace of raising rates approximately every six months to avoid the risk of a spike in bond yields, as well as criticism of falling behind the curve." Later this week, Japan's largest labor union organization Rengo will announce the first significant results of Japan's annual wage negotiations, which could further fuel expectations of an early rate hike by the Bank of Japan. Last week, Rengo, Japan's largest labor union organization, stated that its member unions are seeking an average increase in wages of 6.09% this year, exceeding last year's demand, which already saw the highest wage increase in 30 years. This could mean that Japan's annual wage negotiations may once again see substantial wage increases. Kazuo Momma said that for the likelihood of a rate hike in May to increase, the wage increase announced by Rengo needs to be at least 5.7% or higher. Furthermore, despite the weakening yen being a key factor driving the Bank of Japan to raise rates, Kazuo Momma stated that investors are currently more focused on the downside risks to the US economy. Trump recently warned Japanese officials not to weaken the yen in favor of their trade position. However, in reality, the Japanese government spent approximately $100 billion last year through a series of intervention measures to support the yen rather than weaken it. Kazuo Momma said, "The Japanese government and the Bank hope for a further appreciation of the yen. They may welcome the rhetoric of the Trump administration." Multiple factors strengthen expectations for the Bank of Japan to raise rates Japan's Ministry of Health, Labour, and Welfare announced on Monday that basic wages in January rose 3.1% year-on-year, the largest increase since October 1992. In addition, a more stable wage trend indicator showed that wages for full-time workers increased by 3%, surpassing this threshold for the first time since July last year. Overall, these data suggest that while workers' household budgets are affected by ongoing inflation, the trend in basic wages remains solid. Therefore, these data may encourage the Bank of Japan to continue gradually raising rates. These data were released as annual wage negotiations between Japan's labor unions and employers are expected to reach a climax later this week, resulting in preliminary agreements for this year. According to a survey released in mid-February by the Japanese market research company Teikoku Databank, among the 11,000 Japanese companies surveyed, about 61.9% of respondents plan to increase employee wages in the new fiscal year as companies strive to recruit and retain employees, the highest proportion ever. Additionally, around 56% of surveyed companies indicated plans to increase basic wages, the highest level tracked by Teikoku Databank since it began monitoring this issue in 2007. While the survey did not provide detailed information on the wage increase plans of Japanese companies, it suggests that the momentum of wage growth in Japan continues and will have a broader impact. This is undoubtedly a positive signal for the Bank of Japan. In addition to wage growth, a series of economic CKH HOLDINGS data indicating rising inflation, as well as hawkish statements from Japanese policymakers, are also important factors driving up expectations for the Bank of Japan to raise rates. Bank of Japan Deputy Governor Shinichi Uchida reaffirmed on Wednesday the Bank of Japan's position to continue raising policy rates, although he hinted that the Bank of Japan is unlikely to raise rates at consecutive meetings, indicating a low chance of a rate hike in March. Furthermore, some analysts believe that US President Trump's focus on addressing trade imbalances is beneficial for the Bank of Japan to raise rates, as it would weaken Japan's government's historical resistance to a stronger yen and rate hikes, thereby allowing the Japanese government to take a more relaxed stance on the issue of yen appreciation.