Photo/Illutration The Bank of Japan head office in Tokyo’s Chuo Ward (Asahi Shimbun file photo)

The Bank of Japan will pay close attention to Donald Trump’s inaugural address as U.S. president and subsequent market reaction before deciding whether to raise interest rates.

Central bank executives in recent days have made comments suggesting an increase was in the cards.

On Jan. 16, BOJ Governor Kazuo Ueda welcomed the continuing trend among businesses for wage hikes.

Ueda said the central bank will discuss whether another rate increase is called for.

Earlier, Ryozo Himino, a BOJ deputy governor, said the central bank’s inflation target of 2 percent now seemed attainable.

Himino also noted that Trump’s inaugural address on Jan. 20 will likely set the broad course of his administration’s economic policy.

The BOJ Policy Board is expected to vote to raise interest rates at its scheduled Jan. 23-24 meeting if market reaction to Trump’s speech is not excessively turbulent.

A hike will likely involve the central bank raising the target for the uncollateralized overnight call rate, a rate commercial banks charge on loans to each other, to about 0.5 percent from the current target of about 0.25 percent.

It would mark the first time in about 17 years for the 0.5 percent target figure to be set.

In late December, Ueda said any decision about another interest rate hike would be made after ascertaining the momentum for salary hikes in this spring’s “shunto” labor negotiations as well as the Trump administration’s economic policy course.

Over the new year, a range of corporate executives made comments about raising wages again this year.

BOJ members at a branch head meeting on Jan. 9 learned that the momentum for wage increases had spread to a wider range of business sectors as well as among companies of varying sizes.

Any rate hike decision would be made through a majority vote of the three BOJ executives and six members of the Policy Board.

Most board members are expected to back any proposal by bank leaders about a rate hike, according to several bank sources.

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