Japan's labor cash earnings data came in unexpectedly weak, which will amplify bearish bets on the yen as it complicates the Bank of Japan's path toward an early interest rate hike. Japan's real wages in November recorded their largest decline since January. Government data showed that Japan's inflation-adjusted real wages fell 2.8% year-on-year in November. Market analysis suggests that with the wage data significantly missing expectations, the goal of gradually raising interest rates into a neutral range above 1% now appears to be a distant and unattainable target. Back in December, Japanese politicians required extensive persuasion to support a mere 25-basis-point hike; this report clearly lacks the strength to prompt their renewed support for a BOJ rate increase. Meanwhile, this data is unlikely to have a substantial impact on today's 30-year Japanese Government Bond (JGB) auction, as the long end of the bond yield curve has consistently been unpopular and dysfunctional.
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