By Leika Kihara

TOKYO (Reuters) - The Bank of Japan is close to ending eight years of negative interest rate policy, with expected historical wage hikes heightening the prospect of a landmark shift away from its massive stimulus programme next week.

Internal preparations for an exit have been in the works since Kazuo Ueda took office as BOJ governor in April last year, and were mostly done by year-end, say sources familiar with the bank's thinking.

BOJ officials, including Ueda, have recently stressed the timing of a shift away from negative rates would depend on the outcome of this year's annual wage negotiations between workers and employers.

The bumper pay hikes offered by big firms like Toyota Motor (NYSE:TM) this month, the biggest in 25 years, are now seen clearing the way for the BOJ to phase out its massive stimulus.

If the board believes the conditions are right, the BOJ will set the overnight call rate as its new target and guide it in a range of 0-0.1% by paying 0.1% interest to excess reserves financial institutions park with the central bank.

The BOJ will likely make a final decision on whether to pull the trigger next week, or hold off until April, after scrutinising a preliminary survey of big firms' wage talk outcome to be released by labour umbrella Rengo later on Friday.

"If big firms are offering big pay hikes, it's highly likely that smaller firms will follow suit to some extent so they can hire enough staff," said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute.

"Rengo's survey due out on Friday will give the BOJ a big reason to end negative rates in March," he said.

Analysts expect Friday's Rengo survey to show wage increase of around 4.5% or even 5%, far above the 3.8% hike in a poll conducted a year ago, heightening hopes that rising pay will revive stagnant household spending and broader economic growth.

Upon exiting its negative rate policy, the BOJ will also ditch its bond yield control and discontinue purchases of risky assets such as exchange-traded funds (ETF), sources have told Reuters, putting a formal end to the radical monetary experiment of former Governor Haruhiko Kuroda in place since 2013.

A poll taken in March showed 35% of economists expect the BOJ to end negative rates at the two-day meeting ending on Tuesday, up from the previous month's 7% but still below 62% projecting such action at a subsequent meeting on April 25-26.

With an end to negative rates seen as nearly a done deal, the market's attention is shifting to any clues the BOJ could give on the pace of any interest rate hikes thereafter.

Ueda has said the central bank will maintain accommodative monetary conditions even after ending negative rates, and avoid causing any "discontinuity" from the current ultra-loose policy given uncertainty over the economic outlook.

Any guidance on the future policy path that the BOJ could offer upon ending negative rates will likely be in line with such comments, sources have told Reuters.

Under previous governor Kuroda, the BOJ deployed a huge asset-buying programme in 2013 to reflate growth and fire up inflation to its 2% inflation in roughly two years.

The central bank introduced negative rates and yield curve control (YCC) in 2016 as tepid inflation forced it to tweak its stimulus programme to a more sustainable one.

However, last year, as the yen's sharp falls pushed up the cost of imports and heightened public criticism over the cost of Japan's ultra-low interest rates, the BOJ tweaked YCC to relax its grip on long-term rates.

An end to negative short-term rates would be Japan's first interest rate hike since 2007.

By Alasdair Pal

SYDNEY (Reuters) - New Zealand will report "significantly slower" economic growth for the next few years when it releases a pre-Budget update in two weeks' time, Finance Minister Nicola Willis said on Friday, as slower productivity growth hampers the country's economy.

New Zealand's economy unexpectedly contracted in the third quarter and significant downward revisions were made to economic growth in earlier quarters, leading the market to pull back on bets of further interest rate hikes next year.

That, combined with recent data continuing to be weaker than forecast, has led Treasury officials to reassess growth projections for the economy, Willis said.

"The numbers haven’t been finalised, but I know enough to say they won’t make happy reading," Willis said, according to a copy of a speech to business leaders in Auckland on Friday.

"Treasury is now warning me that growth over the next few years is likely to be significantly slower than it had previously thought."

In December, New Zealand's Treasury forecast real annual GDP growth of 1.5% for the fiscal years ending June 2024 and 2025.

The weaker growth projections would not lead to cuts to government investment, Willis said.

Instead, the government plans to promote growth in several sectors, including space and biomedical engineering, alongside the country's traditional strengths of farming, fishing and tourism.

"With low-growth forecasts bearing down on New Zealand, now, more than ever, we must double-down on the drive for real economic growth," she said.

New Zealand will publish a Budget Policy Statement in two weeks' time, ahead of a Budget due on May 30.

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The U.S. dollar advanced on Thursday, boosted by data showing hotter-than-expected producer prices last month and fewer people seeking unemployment claims, which suggested that the Federal Reserve could reduce the number of rate cuts this year.

The dollar index, which gauges the currency against six major peers, rose in three of the last four sessions. It was last up 0.6% at 103.36. For the week, the index was up 0.6%, on pace for its largest weekly gain since mid-January.

Data on Thursday showed the U.S. producer price index for final demand rose 0.6% in February after advancing by an unrevised 0.3% in January. Economists had forecast the PPI climbing 0.3%.

In the 12 months through February, the PPI surged 1.6% after advancing 1.0% in January. The report followed data on Tuesday that consumer prices increased strongly for a second straight month in February.

A separate report from the Labor Department was also better than expected, showing that U.S. initial claims for state unemployment benefits fell 1,000 to a seasonally adjusted 209,000 for the week ended March 9. Economists had forecast 218,000 claims in the latest week.

"The price action proves the point that people were not positioned for how strong everything (U.S. data) was this morning," said Erik Bregar, director of FX and precious metals risk management, at Silver Gold Bull in Toronto.

"The thinking now is that: what could the Fed say dovishly next week? If anything, they could be on the hawkish side."

The Fed's current dot plot, or the central bank's interest rate forecast, showed three rate cuts for 2024, although that was released back in December. U.S. inflation numbers since then have been sticky, while the labor market remained tight.

The U.S. central bank's policy meeting is set to run from March 19-20 and while the market is not expecting any change in interest rates, investors will be closely watching for revisions to the dot plot.

U.S. rate futures have pared back the chances of a rate cut at the June meeting to 60%, from about 67% late on Wednesday, according to LSEG's rate probability app. For 2024, the market is now pricing in less than three rate cuts, down from between three to four roughly two weeks ago.

Another piece of data on Thursday showed some deceleration in spending. U.S. retail sales rose 0.6% last month and the numbers for January were revised lower to show sales tumbling 1.1% instead of 0.8% as previously reported.

Economists polled by Reuters had forecast retail sales in February, which are mostly goods and are not adjusted for inflation, rising 0.8%.

The retail sales report, however, has not dented the market's growing conviction that the Fed's rate-cutting cycle will be gradual.

Elsewhere, the Bank of Japan started to make arrangements to end its negative interest rate policy at the March 18-19 meeting, Jiji news agency reported. The yen firmed against both the dollar and euro after the report but it has since weakened versus the greenback.

Preliminary results of Japan's spring wage negotiations are due on Friday, with several of the country's biggest companies having already agreed to meet union demands for pay increases.

The dollar was last up 0.4% versus the yen at 148.29 yen, while the euro stayed lower against the Japanese unit, down 0.3% at 161.35.

In other currencies, the euro dropped 0.6% to $1.0884. There was no major European economic data on Thursday.

Sterling fell as well versus the dollar, sliding 0.4% to $1.2745.

In cryptocurrencies, bitcoin fell more than 5% after earlier hitting a record $73,803. It was last at $69,381. Exchange-traded bitcoin funds and optimism that the Fed will cut interest rates this year have boosted the biggest cryptocurrency to repeated record peaks.

WASHINGTON (Reuters) - U.S. producer prices increased more than expected in February amid a surge in the cost of goods like gasoline and food, which could fan fears that inflation was picking up again.

The producer price index for final demand rose 0.6% last month after advancing by an unrevised 0.3% in January, the Labor Department's Bureau of Labor Statistics said on Thursday. Economists polled by Reuters had forecast the PPI climbing 0.3%.

A 1.2% jump in the prices of goods accounted for nearly two-thirds of the increase in the PPI. Goods prices were driven by energy products, which surged 4.4% after declining 1.1% in January. Goods prices had edged down 0.1% in January.

In the 12 months through February, the PPI shot up 1.6% after advancing 1.0% in January.

Government data on Tuesday showed consumer prices increasing strongly for a second straight month in February. But economists largely shrugged off the rise, arguing that difficulties adjusting the data for price increases at the start of the year continued to exert an upward bias on inflation.

Wholesale gasoline prices rose 6.8% last month. There were also increases in the prices of diesel and jet fuel. But prices for hay, hayseeds, and oilseeds fell as did those for iron and steel scrap and asphalt. Food prices rose 1.0%, amid increases in the costs of eggs and beef.

Excluding food and energy, goods prices rose 0.3%, matching January's gain. This suggests that goods deflation, the major driver of lower inflation, was drawing to an end and services would need to pick up the slack in easing price pressure.

Services gained 0.3% in February after rising 0.5% in the prior month. A 3.8% increase in the costs of hotel and motel rooms accounted for a quarter the increase in services prices.

There were also increases in the costs of outpatient care, airline tickets as well as securities brokerage, dealing and investment advice. Portfolio management fees gained 0.2% after accelerating 5.9% in January.

Portfolio management fees, healthcare, hotel and motel accommodation, and airline fares are among components that go into the calculation of the personal consumption expenditures (PCE) price indexes. The PCE price indexes are the inflation measures tracked by the Federal Reserve for it 2% target.

Financial markets expect the U.S. central bank to start cutting interest rates by June. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.

The narrower measure of PPI, which strips out food, energy and trade services components, rose 0.4% in February after climbing 0.6% in January. The core PPI increased 2.8% year-on-year after gaining 2.7% in January.

MUMBAI (Reuters) - Rating agency Fitch, on Thursday, raised its estimate for India's economic growth for this fiscal year and next due to strong domestic demand and persistent growth in business and consumer confidence levels, but tempered its view on rate cuts.

Fitch expects the Indian economy to continue its strong expansion, with real gross domestic product forecast to increase by 7.0% in fiscal 2025, which starts in April, a 50 basis points (bps) increase from its December forecast, it said in a report.

India's economy grew 8.4% in the final three months of 2023, its fastest pace in 18 months, led by strong manufacturing and construction activity.

"With GDP growth having exceeded 8% for three consecutive quarters, we expect an easing in growth momentum in the final quarter of the current fiscal year, implying an estimate of 7.8% for growth in FY23/24," Fitch said.

The rating agency's forecast for fiscal 2024, which ends this month, is above the Indian government's revised estimate of 7.6% and one of the most bullish on record.

However, Reserve Bank of India chief Shaktikanta Das recently said growth could be very close to 8%.

"Domestic demand, especially investment, will be the main driver of growth, amid sustained levels of business and consumer confidence," Fitch said.

"Our forecasts imply that growth in the short term will outpace the economy's estimated potential, and that the pace of growth of activity will then moderate towards trend in FY25."

On retail inflation, Fitch expects the headline number to steadily decrease to 4% by the end of this calendar year on the assumption that recent food price volatility will subside.

It now expects the Reserve Bank of India to cut interest rates only in the second half of the calendar year, lowering its estimate to 50 bps of rate cuts, from 75 bps in December, due to the stronger growth outlook.

The RBI has kept the repo rate unchanged at 6.50% for the last six consecutive meetings and has reiterated its commitment to reaching the 4% inflation target on a sustainable basis.

A look at the day ahead in European and global markets from Rae Wee

Closely watched U.S. inflation data this week aroused little excitement in the market, but investors will have another chance to be inspired if Thursday's producer prices and retail sales numbers offer fresh hints on the direction of Fed rate policy.

Expectations are for U.S. retail sales to have bounced back in February after a surprise drop at the start of the year, while the producer price index (PPI) for final demand is also forecast to show a steady increase for the month.

Both are critical data points, given that the PPI numbers feed into the Fed's preferred inflation gauge and that retail sales account for nearly half of household consumption.

Consumer spending is by far the biggest driver of the U.S. economy, which seems still to be in solid shape - thus reducing the need for the world's largest central bank to rush into cutting rates.

Futures pricing now shows a less than 10% chance of an easing cycle beginning in May, according to the CME FedWatch tool, although that could change very quickly as Fed expectations tend to swing from one data point to the next.

The bond market seemed to reflect bets for a higher-for-longer U.S. rates scenario, with the two-year Treasury yield notching a two-week high on Thursday. The dollar, however, was still largely on the back foot. [FRX/]

In Japan, bets that the central bank would soon exit its prolonged ultra-easy rate policy kept the Nikkei under pressure and on track for its worst weekly performance in three months.

Elsewhere, a Washington-based global trade association representing biotechnology companies is taking steps to "separate" from Chinese member Wuxi AppTec, its new CEO said in a letter, a sign of the fraught ties between the world's two largest economies.

Shares of Wuxi AppTec in Hong Kong tumbled more than 9%, while its Shanghai shares fell 4.7%.

Key developments that could influence markets on Thursday:

- U.S. PPI (February)

- U.S. retail sales (February)

- ECB's Isabel Schnabel, Pablo Hernandez de Cos speak

(By Rae Wee; Editing by Edmund Klamann)

By David Lawder

ELIZABETHTOWN, Kentucky (Reuters) -U.S. Treasury Secretary Janet Yellen on Wednesday said President Joe Biden's administration is taking steps to ensure success of the domestic electric vehicle (EV) industry in the face of China's growing exports in the sector and heavy government subsidies.

Asked whether the United States needs new tariffs on Chinese EVs, Yellen told reporters at a new battery materials plant in Kentucky: "I don't want to get ahead of where we are, but it is a commitment that President Biden has made ... that we're going to want our domestic industry to be successful."

As Chinese demand flags at home amid economic turmoil, its growing exports of EVs to global markets have raised alarm bells in Washington over the potential to inflict harm on U.S. automakers, just as its excess capacity in steel and aluminum decimated U.S. metals producers in past decades.

Current U.S. tariffs of 25% on all Chinese vehicles imposed by former President Donald Trump effectively keeps Chinese EVs out of the U.S. market for now. But China's largest producer, BYD (SZ:002594), has started to export to Mexico and is scouting locations for a Mexican factory.

Some U.S. senators have urged the Biden administration to increase tariffs on Chinese EVs further.

The U.S. Commerce Department has opened a probe into whether Chinese vehicle imports pose national security risks because of the data they transmit, an effort that could lead to additional restrictions on both EVs and conventional cars and trucks.

Another avenue for higher U.S. trade restrictions on Chinese EVs would be a long-running review of the Trump tariffs on hundreds of billions of dollars worth of Chinese imports being conducted by the U.S. Trade Representative's office.

Yellen and other administration officials have called for those "Section 301" tariffs to be made more "strategic" to better protect industries important to U.S. economic security while lowering costs elsewhere.

"It is true that China is investing very massively in this industry and the United States is taking steps to ensure that our industry is successful," Yellen said, without specifying such actions.

A key objective of the 2022 Inflation Reduction Act clean energy incentives, Yellen said, was to cut U.S. dependence on Chinese supply chains for batteries, and associated minerals and components.

Provisions including "foreign entity of concern" rules will make it increasingly difficult for U.S. made EVs to include Chinese content and still qualify for consumer purchase tax credits of $7,500.

Yellen said the U.S. approach aimed to balance "both climate goals and also concern about jobs and having meaningful presence in industries that are going to be driving our economy."

By Lucy Raitano

LONDON (Reuters) - Corporate dividends globally hit an all-time high of $1.66 trillion in 2023, with record payouts by banks making up half of the growth, a report showed on Wednesday.

On a worldwide basis, 86% of listed companies either increased dividends or maintained them, according to the quarterly Janus Henderson Global Dividend Index (JHGDI) report, which also forecast that dividend payouts would hit a new record of $1.72 trillion this year.

The world's biggest dividend payers in 2023 were Microsoft (NASDAQ:MSFT), followed by Apple (NASDAQ:AAPL) and Exxon Mobil (NYSE:XOM).

The total value of corporate dividends rose from $1.57 trillion in 2022 with underlying growth - which accounts for currency movements, special dividends, timing changes and index changes - of 5% from 2022, UK asset manager Janus Henderson said.

"Corporate cash flow in most sectors remained strong and this provided plenty of firepower for dividends and share buybacks," said Ben Lofthouse, head of global equity income at Janus Henderson.

According to LSEG data, earnings growth for the S&P 500 in the fourth quarter of 2023 was expected to come in at 9% year-on-year.

High interest rates have boosted bank margins and banks paid out a record $220 billion to shareholders in 2023, an underlying rise of 15% from 2022 and continuing a rebound after bank payouts were frozen during the pandemic.

Any positive impact from higher banking dividends was almost entirely offset by cuts from the mining sector, the report found, as lower commodity prices weighed on mining profits.

Hefty dividend cuts by five prominent companies - miners BHP and Rio Tinto (NYSE:RIO) as well as Petrobras, Intel (NASDAQ:INTC) and AT&T (NYSE:T) - reduced the underlying 2023 global dividend growth rate by 2 percentage points.

"Beyond these two sectors (banking and mining), whose impact was unusually large, we saw encouraging growth from industries as varied as vehicles, utilities, software, food and engineering, demonstrating the importance of a diversified portfolio," the report said.

On a geographical basis, Europe (excluding the UK), was a key growth driver, contributing two-fifths of the global increase as payouts rose 10.4% on an underlying basis to $300.7 billion.

Japan was also a major contributor, though it was somewhat tempered by a weak yen, the report said.

While the United States made the most significant contribution to global dividend growth due to its size, a 5.1% growth rate was in line with the global average.

Emerging markets dividends were flat on an underlying basis, with Janus Henderson highlighting steep cuts in Brazil and lacklustre growth in China.

Janus Henderson sees another 5% growth in corporate dividends this year to $1.72 trillion.

Even though the rapid increase in bank dividends is likely to slow, rapid declines from the mining sector might also be less impactful, said Lofthouse.

"Energy prices remain firm so oil dividends look well supported and the big defensive sectors like healthcare, food and basic consumer goods should continue to make steady progress."

By Joey Roulette

WASHINGTON (Reuters) - The FAA on Wednesday granted SpaceX a license to test-launch the company's Starship rocket system from Texas, according to the agency's website, paving the way for another early demonstration of a spacecraft crucial to Elon Musk's satellite launch business and NASA's moon program.

"The FAA determined SpaceX met all safety, environmental, policy and financial responsibility requirements," the Federal Aviation Administration (FAA), which oversees launch site safety, said in a statement.

The regulatory sign-off came less than 24 hours before Starship's targeted launch time of 7 a.m. CDT (1200 GMT)on Thursday from SpaceX's Boca Chica, Texas, launch facilities, where the rocket's first two attempts to reach space blasted off from last year.

Starship, a towering two-stage rocket system that will become the centerpiece of Musk's space launch business, will aim to fly farther and clinch more testing objectives than its last two flight tests, including the reignition of the system's upper stage engine and opening its payload door in space.

Unlike the last two tests, both which ended in explosions before reaching a planned splashdown target in the Pacific Ocean near Hawaii, the Thursday test flight will launch on a trajectory bound for the Indian Ocean, a flight profile picked by SpaceX to enable the mission's new test objectives, the company said.

Starship's window to launch on Thursday - and on Friday, as a backup - is from 7 a.m. to 8:51 a.m. CDT (1200 GMT to 1351 GMT), SpaceX said.

NASA, under a roughly $4 billion contract with SpaceX, plans to use Starship in the next few years to send the first crew of humans to the moon's surface since the Apollo era more than half a century ago.

The upcoming Starship test is an early demonstration on a long path to prove itself capable of safely getting astronauts to the moon, a feat that will involve other NASA spacecraft and require extra fuel for Starship supplied in space by a fleet of "tanker" refueling Starships.

SpaceX CEO Musk has said the rocket should fly "hundreds" of uncrewed flights before humans climb aboard. NASA officials in recent months have stressed a need to see faster progress on the rocket's development as it races with China, which envisions its own crewed moonshot by around 2030.

The FAA's commercial space office issued the license with a tight workforce that has struggled in recent years to keep pace with an uptick in private launch activity driven mainly by SpaceX and its novel Starship tests.

The agency this week proposed a $57 million budget for its space office for fiscal year 2025, a 36 percent increase largely meant to grow its regulatory staff and kickstart development of potential regulations for more novel private space activities.

By Tom Westbrook

SINGAPORE (Reuters) - Barely weeks after Japanese stocks broke three-decade highs, the country's financial markets are hurtling toward another phenomenon not seen for the best part of a generation: rising interest rates.

Bankers are attending remedial classes on what to do when rates move and trading rooms are setting up for moribund derivative markets to spring to life -- as they have begun to do.

Their pricing implies a matter of months at the most before the last bastion of a decades-long monetary policy experiment with negative short-term rates falls. An exit by the Bank of Japan is expected by June, with an even chance that rates will rise to zero next week.

Such a move, up 10 basis points, would be small, leaving traders to focus on broader signals: whether any change is implemented immediately, or later, and whether the BOJ winds down its enormous buying programme for assets ranging from Japanese government bonds to listed equity funds.

The symbolism is also heavy as Japan seeks to leave behind "lost" years marked by deflation and reawaken the fourth-biggest economy in the world as a destination for investment -- a change already rippling through corporate Japan and global markets.

"I personally think this is going to be the beginning of a new era," said Keita Matsumoto, head of financial institutions sales and solutions at Citigroup Global Markets Japan.

"It's a fundamental shift in peoples' mindset," he said, one that may take five or 10 years' adjustment as the economy changes.

Some of the biggest implications may be in Japan's 1.3 quadrillion yen ($8.7 trillion) government debt market.

Matsumoto said investors have positioned to benefit from selling of short-dated paper since a rise in central bank deposit rates would quickly draw banks' capital out of bonds and into cash.

Should a bigger policy shift drive longer-term rates up sharply, Japanese investors -- who own some $2.2 trillion in foreign debt -- might also lose their appetite in favour of paper closer to home, which would drag on global bond markets

In foreign exchange, a market that is heavily short the yen has reversed a little in recent days and must adjust to paying interest, albeit small, on the Japanese currency.

Equity investors have been snapping up bank shares on bets loans and margins will grow, though in the last few days trade has turned nervous as the potential policy shift draws near.

The Nikkei, which made a record high above 40,000 last week, posted its sharpest fall in five months on Monday.

"There has been a fair degree of excitement about the Japanese economy and monetary policy ... becoming 'more normal' and like the other countries," said Niraj Athavle, J.P. Morgan's head of sales and marketing in Singapore.

"The equity market, because of the fact that the Japanese are moving out of a deflation forever situation ... is beginning to attract a lot of attention - bond markets and swap markets will follow as Japan tends to become a more normal economy."

SWEET SPOT

Previous hiking cycles in Japan took place under such different circumstances that comparisons are tricky.

In 1989-90 it raised rates by more than 300 basis points, bursting a property bubble and crushing the economy and stock market for a decade. In 2006, an attempt to end a zero-rate policy fell flat as inflation couldn't be sustained.

This time investors and policymakers both point to higher wages and changes in companies' attitudes as new elements. Pay negotiation data due on Friday, before the BOJ meets, can move markets especially if it surprises to the upside.

"Markets still underprice any long-term changes in Japan," said Ales Koutny, head of international rates at Vanguard, who is increasing short exposure to Japanese government bonds.

"A wage number high enough that supports consumption could focus minds on a potential longer hiking cycle."

He sees the five- to 10-year tenors as most vulnerable if the BOJ winds back its support and says 10-year yields could surpass 1% and in the longer term trade like German bunds - which yield 2.3% - if wages, consumption and inflation start to reinforce one another.

Two-year Japanese yields, which track short-term rate expectations, have hit 13-year highs at 0.2%, five-year yields and 10-year yields are around multi-month highs of 0.4% and 0.77%, respectively. [JP/]

The yen, after hitting levels near its cheapest on record in real terms, last week climbed 2% for its sharpest weekly jump on the dollar in eight months as short-sellers retreated slightly.

To be sure the journey out of such a long period of unorthodox policy is fraught and the distortions wrought on the economy will take a long time to unwind. Smaller businesses in particular face challenges from higher borrowing costs.

Crowded bets on bank stocks are vulnerable to "sell the fact" losses on a policy shift, says Nomura's Japan macro strategist Naka Matsuzawa. Already, the BOJ's refusal to buy equity funds when markets fell this week has unnerved some investors.

A yen rally to 135 or 130 to the dollar could also trigger worldwide reverberations, investors say, as that would likely trigger "carry" trades funded in yen to be unwound.

Yet, at 147 to the dollar on Wednesday that is a long way away and most see a tentative return of animal spirits to Japan as a positive.

"In 2024, Japan has neither an overheating property market nor is it mired in deflation," said Byron Gill, managing partner at Indus Capital Partners in San Francisco, with real rates - the nominal rate less inflation - likely to stay sub zero.

"If, at the same time, wage growth can overtake the rate of inflation," he said. "Japan may find itself in a real sweet spot for both the economy and for risk assets."