Will prices in Japan surge to drive policy changes?

Japan is among the few markets where inflation hasn’t been a headache for households and central bankers. But instead, policymakers in Japan welcome inflation. This month, the country is concluding the spring wage negotiations, or Shunto that takes place every year.  What’s special about this round of Shunto is that the outcome of wage increases will likely trigger a virtuous cycle of rising wages and inflationary prices, ultimately ushering an end to a decades-long deflationary economy. The country’s largest federation of trade unions says the workers are poised to receive a weighted average of 5.28% in salary increments in fiscal year 2024. These developments will encourage the Bank of Japan (BoJ) to start normalising its policy by first reversing the yield curve-control policy and negative interest rates. Japan’s Nikkei 225 index notched a robust gain of 8% in February and its...