Japan's biggest rise in base wages since 1994 has bolstered the case for a central bank rate hike

Japanese workers' base pay rose by the most since 1994, in a sign that corporate promises of the biggest pay rises in three decades are starting to take effect.

Japan's Ministry of Health, Labour and Welfare announced Wednesday (June 5) that basic wages rose 2.3 percent in April from a year earlier, driving nominal wages up 2.1 percent. A more stable measure, which eliminates sampling problems and strips out bonuses and overtime pay, also showed a 2.1 percent increase in wages for full-time workers.

The survey results provide fresh evidence to the Bank of Japan that a virtuous cycle of rising wages linked to demand-led price increases may be near. After raising interest rates in March for the first time since 2007, the BOJ is seeking stronger evidence to confirm this trend.

The Bank of Japan meets next week to decide policy. The most popular view among economists polled in April was that the central bank would wait until October to raise rates again, but expectations for an earlier move have risen since the survey, in part because of persistent weakness in the yen, which could spur higher import prices.