The bond purchases will end prior to any increase in the cash rate. For inflation to be sustainably in the 2 to 3 per cent range, it is likely that wage growth will need to exceed 3 per cent. That is on the basis that labour productivity continues to increase and that the labour share of national income remains broadly steady.
In addition, the bills to rebuild the stability of the financial system are being deliberated at the Diet, and the reduction exceeding ¥ trillion in personal income taxes and corporate taxes is expected to be discussed in detail. The materialization of these policies along with their effects on corporate and household sentiment should be carefully monitored.