The BOJ has ramped up its hawkish rhetoric over the past week

　　The Bank of Japan has ramped up its hawkish rhetoric over the past week in what industry insiders say is an effort to prepare markets for the end of negative interest rates. The central bank could end its negative interest rate policy in the first few months of next year.

　　The Bank of Japan decided last month to ease the ceiling on long-term interest rates by adjusting its Yield Curve control (YCC) policy. Comments made shortly after he took office this year appeared to advocate a continuation of the Kuroda era's stimulus policies, in contrast to Ueda's hawkish leanings today. Three sources familiar with the BOJ's thinking said the softening of its dovish tone was deliberate.

　　"The boj governor's stance on inflation has been gradually changing over the past few months, which provides a good guide to the BOJ's policy direction," one of the sources said.

　　Another source said: "The BOJ may now be in the stage of finding the right time to raise interest rates."

　　Withdrawing stimulus too quickly could hurt a fragile economic recovery and send markets reeling, complicating Ueda's efforts to wean Japan off the ultra-loose monetary conditions of the past decade. However, with inflation persistently above the boj's 2 per cent target, the economic case for a shift in monetary policy is strengthening.

　　After easing the YCC at its last policy meeting, the BOJ's next goal is to get short-term interest rates out of negative territory early next year, sources said.

　　The BOJ has said labor talks between companies and unions next spring will be key to influencing the timing of the exit. Many large companies typically finalize pay around mid-March, raising the possibility of a policy change in April. But the BOJ does not necessarily have to wait until the end of wage talks to change policy, as long as it can foresee sustainable achievement of the price target, the sources said.

　　The Bank of Japan's nine-member policy board has also leaned more hawkish, with some voicing the need to begin phasing out its massive stimulus and communicating the possibility of a future exit from ultra-low interest rates.

　　"The boj is starting to lay the groundwork for policy normalisation," said Masari Iwatashita, chief market analyst at Daiwa Securities.

　　The BOJ's Tankan business survey on Dec. 13, a meeting of regional branch managers in early January, and comments from corporate and union executives on pay targets for next year will all provide data for the policy review. That leaves open the possibility of a change in policy in January, when the BOJ reviews its quarterly price forecasts.