A strong rise in base pay in the spring wage negotiations (Shunto) would help convince the Bank of Japan that the current weakness in inflation will prove temporary. A tight labour market and strong corporate profits suggest that a rise in base pay of around 1% is possible. If that happened, policymakers would probably wait a few more months before announcing additional easing. However, it should eventually become clear that the chances of hitting the 2% inflation without more stimulus are slim.
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