- Capital Economics
The Japanese Yen is still one of the main losers over the last year, with Yen index falling 4.78% during the last 250 trading days. Nevertheless, the currency stabilized this year, as positive data diminished hopes for additional stimulus any time soon. But that was before and after the tax hike, when consumers and companies increased their spending in anticipation of higher costs. However, it seems that the boost is losing its steam and this time data reflect the true situation in the world's third largest economy. On Tuesday the Yen lost 0.13% to trade at 101.98 against the Buck, adding to earlier losses.
Household spending accounts for majority of overall economic activity, hence, a 3.0% annual drop in spending in June is a worrying sign for Japan's policy makers. This comes following an 8% drop in May and a 4.6% decline in the fourth month. On a monthly basis sales plunged 0.6%. Another disappointing set of data came from the labour market, with jobless rate rising to a six-month high of 3.7% last month. Still, policy makers expect that the tight labour market conditions will help workers bid for higher wages, thereby boosting consumer spending and as a result providing higher inflationary pressure. A report also showed that base wages picked up 0.2% in May, posting the first increase in over two years.
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