Wage Momentum Appears Strong, But March BoJ Shift Not Fully Priced

A number of headlines have crossed so far today from a variety of Japanese companies and organizations outlining agreements made with unions on this year's wage demands. For the most part companies are stating that wage demands are being met in full. Headlines from industry heavyweight Toyota was one of the first to cross.

• A number of companies followed, while the Association of Metal, Machinery and Manufacturing workers stated they have secured an average pay rise of 5.32% (this body is affiliated with 60 unions) (BBG). This was reportedly a much larger rise than was seen last year.
• Rengo, the largest trade union federation in the country, will announce results on Friday in terms of preliminary aggregate estimates. The organization stated that demands this year are at 5.85%. Last year the demand was 4.49%, with the actual outcome of 3.8% delivered (BBG).
• One focus point will be the extent to which wage gains are delivered at small and medium sized enterprises, where profit margins are likely to be more challenging. This was a point raised by Chief Cabinet Secretary Hayashi, although it was added that momentum around wage hikes is strong.
• Local media reported yesterday that if wage gains are 'significantly' above last year's 3.8% it will prompt a BoJ exit from NIRP. Still, a shift in March from the BoJ is by no means a sell-side consensus viewpoint at this stage.
• In terms of market pricing, prevailing sentiment indicates a 60-70% probability of a move occurring in Mar/Apr, with 100% priced by June.