Chart of the day - USDJPY (09.01.2025)

The USDJPY pair risen above 158, amid strengthening US dollar. Japanese workers' base incomes increased the most in 32 years, providing potential support for the central bank to hike interest rates this month. On the other side, real wages felt in December, 4 months in a row, making the situation hard for BoJ.

• Japan's real wages fell monthly by -0.3% in November, marking the fourth consecutive monthly decline. According to Kyodo the nominal wages, or the average total monthly earnings per worker including base and overtime pay, increased YoY by 3% to 305,832 yen ($1,900), rising the 35th straight month in a row. Excluding bonuses and non-scheduled payments, average wages rose 2.7%, which is the highest rise in 32 years.
• Also, consumer prices in November (used to calculate real wages), grew 3.4%  in November, accelerating from a 2.6% increase in October. The overall surge in Japanese consumer prices was caused by reduced government subsidies for utility bills, but also persistently higher food costs.
• According to Dai-Ichi Life Research institute note from today '(...) The real wages are expected to clearly increase in December due to robust winter bonuses, but they could fall again from January onward. Even though nominal wages will likely continue to increase, the real wage could still fall in some months in the first half of this year because of the upward pressure on inflation, mainly food prices. (...) It will likely take some time for real wages to enter a solid positive trend.'

Will BoJ make a hawkish move in 2025?

As we can see, Japanese economy growth has fallen short of inflation, with real wages still below consumer prices; trimming current BoJ appetite for 'sea change' in monetary policy, at least at this time. Japan keeps rates steady and the Fed members said that the Federal Reserve will slow its lowering of rates, putting the Japanese currency under more pressure. However, that situation may change.

• Bank of Japan Gov. Kazuo Ueda has said that wage increases in the 2025 spring negotiations will be a critical factor for the central bank further policy. Nearly half of economists surveyed expected the BOJ to raise rates in December, but the bank did not do so.
• According to the Japan Association of Corporate Executives, average wage increase by large firms will likely reach 5% this year, potentially pressuring BoJ to increase interest rates. Especially if small businesses wages will also increase, at least at this pace
• The policymakers will pay attention to wage increases among small and midsize companies, where wages may rise even more - at 6% according to Japanese Trade Union Confederation. On the other hand, the latest Japan Chamber of Commerce and Industry survey showed that only 11% of them are planning to raise wages by more than 5%.

The country's auction of 30-year government bonds on Thursday saw strong demand, but in general, the Japanese yen is pressured by unprecedented US dollar strength; investors almost ignore the increasing possibility of rising rates by BoJ. We can expect, that the pair will be extremely volatile, especially in case if US dollar weaken, providing real potential of downside move in USDJPY. As long as US treasuries are on the upside momentum, one step closer to 5%, the USDJPY pair is rising, and Yen is weakening versus the US dollar.

USDJPY (D1, H1 interval)

Wages negotiations in spring may be a medium-term risk for bulls on USDJPY. On D1 interval we can see a 'golden cross' crossover, potentially indicating further upside.

Source: xStation5

Source: xStation5