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Japan’s wage growth data on Monday, April 7, will place the spotlight on the USD/JPY and Bank of Japan. Economists forecast average cash earnings to increase 3.1% year-on-year in February after rising 2.8% in January.
Stronger wage growth could boost consumer spending and demand-driven inflation. A higher inflation outlook may raise expectations of an H1 2025 BoJ rate hike.
Conversely, weaker wage growth may signal softer consumer spending and inflationary pressures. Under this scenario, markets could temper bets on a May or June BoJ policy move.
Wage growth trends significant for the BoJ.
Wage growth remains a key consideration for the BoJ. However, the BoJ also needs wage growth to translate into consumption to drive inflation. US tariffs and heightened trade tensions may impact Japan’s labor market, consumer sentiment, and spending. Trade developments could be crucial for Japan’s economic outlook, suggesting the BoJ might keep interest rates steady in May.
Later in the US session, FOMC members’ commentary will influence USD/JPY trends. Increasing support to delay Fed rate cuts until H2 2025 could boost US dollar demand, potentially driving the USD/JPY pair toward the 149.358 resistance level. Conversely, calls for multiple Fed rate cuts to bolster the US economy could weigh on the US dollar and drag the pair closer to 140.
