Japanese Yen Falters Even as Labor Earnings Post Ten-Month Peak
- Japanese labor cash earnings rose 0.7% YY in May
- This was a ten month-high for the series
- However real cash earnings’ rise was more glacial and won’t please Tokyo
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May’s labor cash earnings were up 0.7% compared to the same month in 2016, official figures showed. That was well above the 0.4% gain which markets expected. The Japanese government also said that regular pay had put in its biggest annual gain since March 2000 and that overtime payments were rising.
Tokyo would desperately like to see wage increases, hoping they’ll feed into overall demand and, thereby, consumer price inflation. That remains very weak despite long and arduous attempts to stimulate it. However, while the numbers are clearly headed in the direction which policy makers would like, progress is slow. Real cash earnings rose by just 0.1% on the year in May. That was better than the 0.1% fall expected but still the sort of snail’s-pace won’t make much inflationary impact.
In so far as the data speak to a strengthening Japanese economy as a response to higher global demand – rather than higher domestic Japanese demand – the ensuing rise in USD/JPY rise makes at least some sort of sense. They also suggest that the policy variance between the Federal Reserve and the Bank of Japan will endure. Japanese monetary policy remains incredibly accommodative, deploying the triple prongs of ultra-low interest rates, enormous quantitative easing and control of the Japanese government yield curve. It is likely to stay that way until signs of a definitive turn higher for inflation are seen.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.