Daiwa: BOJ shifts focus from reaching 2% inflation to keeping it there, wages hold the key

Daiwa Securities argues that the Bank of Japan is shifting its policy focus from achieving the 2% inflation target to sustaining it, with wage growth identified as the decisive variable. This framing implies the central bank will require evidence of durable, broad-based pay increases before it is comfortable with further tightening, rather than relying on headline price readings alone. The transmission channel runs through the rate differential between Japanese and US yields: a slower BOJ normalization path tends to keep the yen under pressure and supports carry trades, while any signal that wage momentum is firming can reprice expectations for future hikes and lift JGB yields. The yen and Japanese government bonds are the most directly exposed, with Nikkei equities sensitive to currency moves given the large export share of index earnings. Traders should watch Japan's monthly labour cash earnings release and the spring wage negotiation outcomes for the next read on whether wage gains are sustaining the inflation trajectory.

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