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The Bank of Japan said on Thursday that companies in regional areas of the country were becoming more eager to raise wages, but warned of high uncertainty on how widespread such increases would become.
The assessment, made in a quarterly report on regional economies, underscores the central bank's cautious optimism over the outcome of this year's annual wage negotiations, which will be key to the timing of ending negative interest rates.
"While the degree varies from region to region, the momentum for wage hikes appears to be heightening this year at a somewhat faster pace than last year," the BOJ said in the report.
"But many firms have yet to firm up their plans on the pace of wage hikes. Quite a number of small and medium-sized firms remain cautious (of hiking wages) due to profit constraints," it said.
The report has drawn strong market attention as bank Governor Kazuo Ueda has pledged to keep ultra-loose policy intact until wage increases become widespread enough to keep inflation sustainably around its 2% target.
(Reporting by Leika Kihara; Editing by Muralikumar Anantharaman)