Yen eyes household spending, wage growth

The Japanese yen has edged lower on Thursday. In the European session, USD/JPY is trading at 150.36, down 0.17% on the day. On the data calendar, Japan releases household spending and average cash earnings (wage growth). Household spending is expected to bounce back with a gain of 0.4% m/m October, after a 1.3% decline in September. Average cash earnings is expected to ease to 2.6% y/y in October, compared to 2.8% a month earlier.

Will BoJ cut in December?

The Bank of Japan will make its rate announcement on Dec. 19. Will the central bank press the rate-cut trigger for the second time this year? BoJ policymakers aren’t known for their transparence, which means investors are in the dark about the BoJ’s rate plans.

What is clear is that the BoJ is on a slow path to normalization and the next move will likely be a rate hike. Governor Ueda has hinted a hike but a dovish member of the Bank, Toyoaki Nakamura, said on Thursday that consumption remains weak and the increase in wages may not be sustainable. There is dissension amongst BoJ members whether to raise rates next week or stay on the sidelines until early 2025, which means the Dec. meeting could be live right up to decision time.

Federal Reserve Chair Jerome Powell sounded cautiously optimistic on Wednesday, saying that the US economy was in “very good shape” and that the Fed could “afford to be a little more cautious” about rate moves. The markets have priced in a rate cut at the Dec. 18 meeting and Powell may be trying to dampen anticipation of further rate cuts in early 2025. Powell may decide to cut in December and stay on the sidelines for a few months with President-elect Trump expected to enact a protectionist trade policy.

USD/JPY Technical

• USD/JPY is testing support at 150.46. Below, there is support at 149.68
• 151.39 and 152.17 are the next support levels

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