Bank of Japan Governor Kazuo Ueda said on Friday that the spring wage negotiations for fiscal 2027 will be key in determining whether Japan's trend inflation stabilises, keeping the focus on wage growth as the central bank weighs its next monetary policy steps. The spring round, known in Japan as shunto, is where unions and employers settle pay for the coming fiscal year.

Speaking at his press conference, Ueda made the following points:

• The BOJ is paying attention to the fiscal 2027 wage talks.
• Spring wage negotiations in FY2027 will be key in determining whether trend inflation stabilises.
• The bank needs to avoid negative effects caused by any drastic rate hike.
• It also needs to avoid a negative impact on financial conditions from excessively fast tightening.
• The vote count at today's meeting was the result of constructive discussion among board members.
• The BOJ will not conduct monetary policy with any concern in mind over what kind of members will join the board.
• It is important to coordinate closely with the government.
• The bank will continue to conduct appropriate monetary policy in line with the law governing the BOJ.

The heavy emphasis on wage talks comes as little surprise, given that wage data has been central to the BOJ's motivation for its next monetary policy steps — the evidence the bank looks to when judging whether inflation is being carried by domestic demand rather than by imported cost pressure. The same was true in the latest fiscal year, though the approach proved something of a double-edged sword. The BOJ chose to wait for clarity and confirmation from the spring wage negotiations, preferring to tighten policy only after firm evidence of stronger wage pressure emerged. Although preliminary results were already suggestive during February and early March, the central bank held off until June before acting. By then, the Japanese economy had already taken considerable damage from higher oil prices resulting from the US-Iran conflict, compounded by an unfavorable mix of cost-push inflation seeping into the economy.

Against that backdrop, Ueda's renewed emphasis on wage talks may leave yen bulls in a tighter spot if they had been expecting the BOJ to step up the pace of rate hikes going forward. With the FY2027 round framed as the decisive test, the wage data released in the interim — together with the evolving composition of the board — will factor into how the policy path is read.

Ueda also did not dwell on the dissenting votes from board members Asada and Sato, making it clear instead that the BOJ will move forward regardless, even if the composition of the board changes again when Naoki Tamura and Hajime Takata depart in July next year. Their departures will give Prime Minister Sanae Takaichi another opportunity to make appointments to the BOJ board, following Asada and Sato — a prospect that could risk an even more dovish balance at the central bank by this time next year.