The Japanese yen (USD/JPY) weakened this morning as the US Dollar strengthened thanks to a large miss on further earnings weakness in Japan.
This morning, the Bank of Japan (BOJ) reported that labor cash earnings, for March, fell 0.4 percent annually. This was well below both the expected 0.5 percent gain as well as February’s 0.4 percent rise. It was also the lowest print since June 2015. Total real cash earnings were horrible as well. This number fell by 0.8 percent after a flat reading in February.
This data literally strips away much of the hope the central bank had of any upward boost towards wage inflation. The BOJ has been trying to get businesses to pay more thus supporting consumer spending. However, inflation expectations remain bleak so Japanese businesses have little incentive to pay higher wages.
Japanese yen remains defensive this Morning
The BOJ Governor Haruhiko Kuroda, as the numbers were being released, told the Japanese Parliament that aggressive monetary easing was still necessary to reach the inflation target of 2 percent. He also said that he is extremely confident that it will be. The markets will need more than this to be convinced as the CPI release showed a tepid 0.2 percent growth.
The Japanese yen was already defensive this morning against the US dollar. However, looking at the above chart, slipped a little as the USD/JPY Fore market hit 113.60 after the news release. The story about weak inflation and wages in Japan is ancient and old news. Traders are used to it.