Dollar slips 0.2% to 158.185 yen as Japan data loom
Key Facts
The dollar fell 0.2% to 158.185 yen in trading on Monday, November 9, reversing some of its earlier gains after rising 0.6% on Friday. The move followed comments by Bank of Japan Governor Kazuo Ueda on the inflation outlook, rather than a new warning in Monday’s session. Ueda said on Friday that the bank expects underlying inflation to remain near its 2% target, while acknowledging “some upside risks.” The remarks put the price trajectory at the center of investors’ focus on the direction of Japanese monetary policy. The yen had continued to trade near levels that underscore the dollar-yen pair’s sensitivity to interest-rate and inflation expectations.
September wage data provide domestic context for that outlook: average nominal wages, or total cash earnings, rose 4.6% year on year to 311,409 yen. At the same time, the inflation rate the ministry uses to calculate the real wage index accelerated to 2.4% from 2.2% in August. Real wages rose 2.2% year on year in September, marking an increase for a ninth consecutive month. The simultaneous growth in wages and acceleration in inflation mean that nominal wage figures alone do not describe households’ purchasing power; the real index measures the effect of prices on what they earn. The series supports the central bank’s monitoring of wage and price developments, but does not by itself determine the timing of its next decision.
The Bank of Japan kept its target for the short-term interest rate at about 1.25% at its October 29-30 meeting, by a vote of 8 to 1. That followed a rate increase on September 18 to 1.25% from 1.0%, the highest level in 31 years, according to the Associated Press. The latest decision shows the bank did not raise the rate again in October, while wage and inflation data remain among the factors markets watch when assessing the policy path. The bank’s schedule also listed a speech by Ueda at an International Monetary Fund lecture in Washington on November 6, which it published on November 7. The inflation comments cited in coverage of the foreign-exchange market date to Friday, November 6.
Attention in Japan turns to Tuesday, November 10, when the Bank of Japan will publish, at 8:50 a.m. Japan time, a summary of opinions from its October 29-30 monetary policy meeting. Japan’s Statistics Bureau has also set November 10 for the release of September household spending data. The releases follow Monday’s session, in which the dollar fell against the yen, after rising 0.6% in the previous session. The summary and spending data could add new readings on policy debate and household demand as markets track inflation and wage developments.