Japanese yen jumps on wage growth, nonfarm payrolls next

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<li>Japanese wage growth rises, household spending declines</li>
<li>US nonfarm payrolls expected to fall</li>
<li>USD/JPY is sharply lower</li>
</ul>
<p>The Japanese yen has climbed sharply on Friday. In the European session, USD/JPY is trading at 143.02, down 0.72%. The yen is poised to record its first winning week in a month.</p>
<p><strong>Japanese wages rise, household spending sinks</strong></p>
<p>The wages of Japanese workers have been stagnant for years. That may not have been a problem when inflation was non-existent, but times have changed. Inflation is curently running around 3% and workers secured sharp wage increases in March. The wage hikes are starting to take effect, as wage growth jumped in May by 1.8% y/y, the highest level since February 1995.</p>
<p>The Japanese consumer continues to hold tightly onto their purse strings, despite the strong wage numbers. Household spending fell 4.0% in June, after a 4.4% decline in May and below the consensus estimate of -2.4%.</p>
<p>Wage growth is a key factor in the Bank of Japan&#8217;s decision-making process with regard to rate policy. Governor Ueda has continued the BoJ&#8217;s ultra-loose policy, stressing that he won&#8217;t tighten policy until wage growth increases enough to sustainably maintain inflation around the Bank&#8217;s 2% target. If wages continue to accelerate in the coming months, pressure will mount on Ueda to consider tightening policy.</p>
<p><strong>Will the real US labour market please stand up?</strong></p>
<p>All eyes are on the nonfarm payrolls report later on Friday. The consensus estimate stands at 228,000 for June, sharply lower than the May reading of 339,000. Investors, however, aren&#8217;t so sure that NFP will decline after the ADP employment report showed a massive gain of 497,000 on Thursday. Unemployment claims and JOLTS Job Openings also declined, leaving investors puzzled over the contradictory signals from this week&#8217;s employment releases. It will be interesting to see the direction taken by today&#8217;s nonfarm payrolls release. If nonfarm payrolls follows the ADP upswing, the US dollar could post strong gains. Conversely, a weak nonfarm payrolls report could weigh on the US dollar.</p>
<p>.</p>
<p><strong>USD/JPY Technical</strong></p>
<ul>
<li>There is resistance at 144.11 and 145.28</li>
<li>USD/JPY is testing support at 143.16. The next support line is 142.43</li>
</ul>
<p> </p>
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