Yen Steady Despite Real Cash Earnings Miss

Talking Points

• Real cash earnings stagnated in October, against market expectations
• This doesn’t look good for the consumer demand Tokyo is desperate to generate
• Markets clearly have other concerns for now however

The Yen was steady against the US Dollar on Tuesday despite some official wage data which don’t augur well for the increased consumer spending which Tokyo would like to see.

Labour cash earnings rose 0.1% on-year in October, below the 0.2% rise markets were expecting but above September’s flat reading. Real cash earnings looked worse. They were flat when economists had hoped on average for a 0.5% rise. They were also far below September’s 0.8%.

Its hard to see how flat real wage growth can do anything but weigh on prospects for consumer spending in Japan, which won’t play well with a government keen to do all it can to raise domestic demand.

However, market focus appeared to be elswhere for now. Asian capital markets are still weighing the likely fallout of Italian Prime Minister Matteo Renzi’s referendum defeat and resignation earlier in the week. They’re also looking ahead to Tuesday’s interest rate decision from the Reserve Bank of Australia, with the cash rate expected to remain at its 1.5% record low.

USD/JPY was at 117.79 after the data, a very modest uptick from the 117.77 level seen just before it.

Steady as she goes. USD/JPY after the data.

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research