Yen shrugs as wage growth a mixed bag

The yen is trading quietly on Thursday. In the North American session, USD/JPY is trading at 157.98, down 0.21% on the day.

Japan’s base salaries rise but real wages decline

Japan’s wage growth for November was a mixed bag, with both good and bad news. On the positive side, base salaries rose 2.7% y/y, the largest increase since 1992. This drove up nominal wages by 3% y/y, up from 2.6% in October and beating the market estimate of 2.7%. The bad news was that real wages, which is adjusted for inflation and better reflects consumer’s purchasing power, declined by 0.3%, the fourth straight month of negative real wage growth.

These mixed numbers are particularly significant for the Bank of Japan, which has stressed that it needs to see evidence of wage increases before it raises interest rates. Wage growth has been rising but is still lagging behind the pace of inflation, which means the guessing game as to the timeline for a rate hike will continue.

The BoJ could hike rates at the Jan. 24 meeting, but aside from a clear lack of direction in wage growth, Donald Trump remains a wild card, perhaps the BoJ’s most significant uncertainty. Trump has pledged tariffs against China and other US trading partners, and the cautious BoJ could  decide to follow Trump’s policy development before making a rate move and wait until March or even later.

Fed says easing cycle will be slow in 2025

The Federal Reserve minutes had little impact on the movement of the US dollar but were significant in reiterating that the Fed plans to go slow on rate cuts in 2025. The minutes raised concern about the upside risk of inflation due to Trump’s pledges to enact tariffs and respond to illegal immigration with mass deportations.

The Fed’s concern with these policies is that tariffs would make imports more expensive and the loss of low-cost migrant workers would lead to productivity losses, either of which would likely push inflation higher.

USD/JPY Technical

• USD/JPY tested pushed through support at 158.27 earlier and is testing support at 157.99. Below, there is support at 157.62
• There is resistance at 158.64 and 158.92

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