Japan’s Labor Cash Earnings have risen by 2.1% year-on-year through April, surpassing the forecast of 1.7%. Additionally, the previous period’s earnings were revised higher to 1.0% from the initial print of 0.6%.
The increase in labor earnings enhances the Japanese inflation outlook. The Bank of Japan (BoJ) has maintained a hyper-easy monetary policy due to concerns over a potential return to a disinflationary environment. However, with labor cash earnings growing faster than anticipated, pressure mounts on the BoJ to reconsider its stance. The prolonged easy monetary policy has weakened the Yen across the board throughout 2024. The significant rate differential between the Yen and other global currencies has left the Yen struggling.
Market Reaction
The USD/JPY is testing the 155.00 level in early Wednesday trading, rebounding after a broad-market Yen bid pushed the pair down to a near-term floor at 154.60. This movement follows a retreat from the week’s peak bids near 157.50.
About Japan’s Labor Cash Earnings
Released by the Ministry of Health, Labor and Welfare, this indicator reflects the average income per regular employee before taxes, including overtime pay and bonuses, but excluding earnings from financial assets and capital gains. Higher labor income typically increases consumption, exerting inflationary pressure on the Japanese economy. Generally, a reading above market expectations is bullish for the Japanese Yen (JPY), whereas a below-consensus result is bearish.
