The Bank of Japan is warming to the idea of tweaking its controversial bond yield control policy later this year, but will likely keep settings unchanged at next week's meeting as it awaits more evidence of sustained wage growth, sources say.
Kazuo Ueda chairs his first policy meeting since becoming BOJ governor on April 27-28 and his appointment has heightened expectations the bank will begin unwinding its ultra-loose settings - the only question is when.
"Given looming overseas economic risks, it's appropriate to maintain ultra-loose monetary policy now," said one of the sources, a view echoed by two more sources. The BOJ is mindful of the dangers of taking any premature steps that could be interpreted as a withdrawal of monetary support, with previous rate hikes in 2000 and 2006 having drawn strong political criticism as causing recession.
"Japan's wage dynamics appear to be changing. It's possible for 2% inflation to be sustainably met," one source said.
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