By Leika Kihara
TOKYO (Reuters) – The Bank of Japan should avoid making big changes to its ultra-loose monetary policy now because real wage growth is still at a standstill, Yuichiro Tamaki, head of the opposition Democratic Party for the People (DPP), said on Tuesday.
The remark by Tamaki, who heads the party that has emerged as a kingmaker after the ruling coalition lost its majority in a weekend election, came ahead of the central bank’s two-day policy meeting ending on Thursday.
“Real wages turned negative in August and are still at a standstill. Japan’s economy is at a critical juncture, so the BOJ should avoid making big policy changes now,” Tamaki told a news conference.
“Once there is certainty that real wages will exceed 4% at next year’s spring wage negotiations, that’s when the BOJ can review monetary policy,” he said.
Prime Minister Shigeru Ishiba’s ruling Liberal Democratic Party (LDP) and its longtime partner Komeito failed to retain a majority in lower house elections on the weekend, raising doubts over how long the 67-year-old premier can keep his job.
To bolster its hold on power, the LDP, which has governed Japan for almost all its post-war history, will likely need to court smaller opposition parties like the DPP.
The BOJ is widely expected to hold short-term rates at 0.25% at Thursday’s policy meeting but signal its resolve to keep hiking borrowing costs if Japan makes progress in durably achieving its 2% inflation target.
A slim majority of economists polled by Reuters expect it to forgo a hike this year, though most expect one by March.
(Reporting by Leika Kihara; Editing by Muralikumar Anantharaman and Shri Navaratnam)
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