- HSBC
It is not a surprise that achieving 2% inflation in next fiscal year is a key priority for the BoJ and Japanese government. 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. Nonetheless, the labour market is sending worrying signs, while the rest of the economy is slowing as well.
Average total wages, overtime and bonuses in the world's third largest economy climbed 0.4% on a yearly basis in June, the Labour Ministry said on Thursday. It compares with a 0.6% increase in May and a 0.7% gain recorded in the third and fourth months. Despite a persistent slowdown June's reading rose for the fourth straight annual rise, the longest stretch since total wages rose for six consecutive months in 2010. The report also showed that real wages, which better reflect the situation in the market and matter more to households, plunged 3.8% over the same period, matching May's reading and marking the sharpest drop since December 2009. Real wages are adjusted for inflation. Shoring up this indicator is vital to sustaining private consumption– the main engine of Japan's economy. While statistics from Japan was not very convincing, strong GDP and FOMC meeting in the U.S. dragged the USD/JPY pair through the 103-mark.
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