USD/JPY is in focus today after November wage data showed another deep fall, potentially derailing plans for the Bank of Japan to begin normalizing policy this year.
Labour cash earnings rose just +0.2% year-over-year compared to 1.5% expected. Real wages fell 3.0% y/y.
Initially USD/JPY was little moved on the data but the Bank of Japan is closely watching spring wage negotiations, according to a report last month from Nikkei.
These numbers are obviously disappointing but there might be a boomerang effect coming into play. No one tolerates real wages falling so the misses in 2023 might only put more upward pressure on 2024 wage negotiations.
The Japanese Trade Union Confederation (JTUC, more commonly known as Rengo) will demand 5% or more in spring wage negotiations and they will have good reason for asking for that much. However this data point certainly raises the stakes and will lead the unions to dig in hard, potentially leading to strikes.
These are all good questions for BOJ Governor Kazuo Ueda at the January 23 BOJ meeting.
Technically, the 146.00/146.10 zone is the area to watch as that was where the spike earlier this month topped out. Beyond that is the 61.8% retracement level at 147.46.
The next move will come from the US dollar side with CPI data due tomorrow and a 10-year Treasury auction due today. Yesterday's 3-year sale was strong and if we see something similar from the bond market today coupled with a low CPI report, the dollar side could certainly soften.
