(Bloomberg) -- The Bank of Japan is set to raise its key interest rate for the first time in 17 years on Tuesday following its two-day monetary policy meeting, Kyodo reported.

The BOJ will raise the short-term rate to the 0%-0.1% range, the report said. The development reflects growing confidence among policymakers that a virtuous cycle of wage growth and price hikes is in motion following this year’s labor-management pay negotiations which saw average wages increase to a 33-year high of 5.28%. 

The BOJ has zeroed in on wage trends since higher incomes would boost consumer purchasing power and make inflation more sustainable.

Nikkei also reported that the BOJ will raise the rate to the 0%-0.1% range at the March meeting and could entirely scrap yield curve control, which keeps the 10-year Japan government bond yield below the 1% level that the BOJ set as a reference point.

In order to avoid a sharp rise in long-term interest rates, the BOJ will continue to purchase government bonds and maintain an accommodative policy even after the lifting negative interest rate policy, Kyodo reported.

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