The head of Japan’s biggest business lobby said he sees signs that demand-led price growth is under way, in a bullish assessment of the inflation environment coming days before the Bank of Japan is expected to hike interest rates.

"The BOJ has said that it won’t raise interest rates unless there’s demand-driven inflation,” Masakazu Tokura, head of Keidanren, said Wednesday. "I believe there are signs that such inflation is emerging,” he added.

Tokura was speaking after meeting with Tomoko Yoshino, leader of the nation’s biggest federation of trade unions, Rengo, to mark the official start of annual wage negotiations expected to culminate with an agreement in March.