(Bloomberg) -- Bank of Japan Governor Kazuo Ueda is keeping his options open for the timing of a widely expected interest rate hike, a position that may fuel further market volatility as investors and economists speculate over a March or April move.

“We are not yet in a position to foresee the achievement of a sustainable and stable inflation target,” Ueda said Thursday after meeting with Group of 20 central bankers and finance chiefs in Sao Paulo, Brazil. “We will continue to seek confirmation whether the virtuous cycle between wages and price began to turn.”

Ueda was speaking after a jump in speculation Thursday over a possible March move by the BOJ to raise rates for the first time since 2007. The market chatter and moves in the currency, bond and swaps markets were prompted by board member Hajime Takata’s remark that the price target was “finally coming into sight.”

Ueda’s comments in Brazil appeared to pour some cold water on an early move this month, but he essentially avoided boxing himself into either timing, while making it clear that the central bank was still on track for a near-term hike.

“It could be either March or April,” said Takuya Kanda, head of research at Gaitame.com Research Institute Ltd. in Tokyo, flagging the view that a rapid sequence of rate hikes that could set the yen alight was not in the pipeline. “Either way the market is largely convinced that even if negative interest rates are lifted, policy will remain accommodative.”

Following the governor’s remarks, market prices offered conflicting takeaways over the timing of the hike. That suggests more swings in asset prices lie ahead as traders try to pin down when Ueda will flick the switch on rates.

The yen weakened against the dollar, suggesting less expectation of immediate action. Volatile overnight swaps continued to flag a growing risk of a March move, rising to 42% compared with around 26% late Thursday. Ten-year government bond yields were hovering around 0.715%, still well above the open on Thursday and pointing to a greater risk of March move than seen earlier in the week.

Given Thursday’s bump in expectations toward a March move, Ueda likely wanted to avoid any further ramping up of speculation that the BOJ will take early action as he looks to maximize his operational leeway. 

What he did make clear was that recent gloomy economic data are not going to knock him off a path toward raising the rate.

Ueda played down the significance of Japan’s slide back into a technical recession as a leveling off of strong post-pandemic growth and expressed his confidence in the economy. 

“There has been no change so far in our view that Japan’s economy is recovering moderately and will continue to do so going forward,” said Ueda.

Ueda said that wage negotiations, expected to culminate in March, will be key for confirming whether the economy is in what he calls a virtuous cycle. Ueda said there’s reason to expect positive results from the wage talks. He said demands from workers are outpacing last year’s level, while many companies are active in responding to their requests.

The initial results of annual wage negotiations between Japan’s biggest union federation and companies will be released on March 15, just a few days before the BOJ’s next meeting on policy.

Economists surveyed in January flagged April as the most likely month for a move, but some of them have switched to March or have at least flagged the risk of an early move.

Among observers weighing in on the timing, Kazuo Momma, a former executive director at the central bank, told Bloomberg on Thursday that he definitely sees April as the month for action, not March. Momma, who is currently executive economist at Mizuho Research & Technologies Ltd., accurately forecast that the BOJ would adjust its yield curve control program in October last year. 

Ueda said the biggest takeaway from the Brazil gathering was confirmation that his G-20 peers share the outlook for a soft landing for the global economy. The bank has cited the world economy as a major risk factor.


--With assistance from Toru Fujioka, Ben Holland and Masaki Kondo.

(Adds market details following Ueda comments)

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