USDJPY Higher After Wage Growth Collapse Kills Rate Hike Hopes

The USDJPY was stronger after Japan’s wage growth fell, likely ending hopes for imminent rate hikes from the BOJ.

USDJPY – Daily Chart

USDJPY – Daily Chart

The USDJPY had tumbled to around 140.00, but a recent pullback saw the pair trading at 146.12. The coming weeks will determine whether this is a bounce or a return to the uptrend.

The yen tumbled after Japan’s labour ministry said that November headline wage growth for Japanese workers slowed sharply, ending hopes for an imminent BOJ rate hike. The Bank of Japan has been seeking evidence of a virtuous cycle linking pay hikes to price increases as a green light for changing its monetary policy.

However, the latest wage growth showed real wages had crashed by 3%, the biggest drop on record, and much deeper than the consensus call for a 2% drop and a drop from October’s -2.3%.

BOJ Governor Kazuo Ueda has been monitoring wage trends for signs there will be enough momentum to achieve its goal of 2% inflation on a sustainable basis. With the latest wage growth data, Japan may be forced to do even more policy easing by year-end.

Bloomberg added: “while Wednesday’s figures will back the rationale for keeping policy settings ultra-easy this month, they aren’t likely to deter economists from predicting a rate hike in coming months.”

In the near term, the BOJ will look again at the annual wage negotiations, which are expected to culminate in March. While Japan’s largest labour union federation urges companies to raise wages by at least 5%, the recent data suggests that any pressure for companies to hike wages is gone.

Governor Ueda said last month that it would be possible for authorities to make some decisions even if they don’t have the full results of pay discussions from smaller firms, which may not come until the summer. Those remarks added to speculation that the likely timing of a BOJ hike would be the April monetary policy meeting.

“The current situation is that wages haven’t caught up with prices,” said Harumi Taguchi, S&P Global Market Intelligence economist. “Given the strong impacts of the base effect from the previous year and the weakness in some sectors, I don’t believe we are in a virtuous cycle yet.” She added that she still sees an exit from negative rates in April at the earliest.

Recent News
Start Trading Now !

Try our demo account for free to learn trading. When you’re ready, switch to a live account and start trading for real.

Popular posts
ATFX

Restrictions on Use

Products and Services on this website are not suitable for the UK residents. Such information and materials should not be regarded as or constitute a distribution, an offer, or a solicitation to buy or sell any investments. Please visit https://atfxvnmprd.wpenginepowered.com/en-au/ to proceed.

ATFX

Restrictions on Use

Products and Services on this website are not suitable for Hong Kong residents. Such information and materials should not be regarded as or constitute a distribution, an offer, solicitation to buy or sell any investments.

使用限制: 本網站的產品及服務不適合香港居民使用。網站內部的信息和素材不應被視為分銷,要約,買入或賣出任何投資產品。

ATFX

Restrictions on Use

AT Global Markets (UK) Limited does not offer trading services to retail clients.
If you are a professional client, please visit https://atfxconnect.com