Japan’s largest trade union group, Rengo, announced a 5.28% wage increase for its workers – supporting the view that the BoJ is likely to hike rates before the summer
The bullish lift presents improved entry levels for bears looking for further yen appreciation and a move lower in USD/JPY. However, the recent bullish lift has gathered pace after bouncing off the and the 146.50 marker, trading above the 50 SMA. Naturally, 150 reappears as the next level of resistance. 146.50 marks the tripwire for a potential change in sentiment if the threat of rate hikes becomes more imminent over the next few days.
One potential stumbling block is Governor Ueda’s own assessment of the local economy where he has noted the recovery is modest and he has seen in some data. This is after a recent revision in Q4revealed that Japan has not entered into a technical recession, but the slight revision appears academic at this point, with the Japanese economy showing signs of concern.
The BoJ is due to meet again next Tuesday to set monetary policy but markets anticipate there will be no change, but the chances of a surprise hike are not to be dismissed . Instead, a more likely outcome will be for the Bank to use the opportunity to tee up the April or June meetings as ‘live’ events for a withdrawal from negative interest rates. The minutes of the meeting will be heavily scrutinised late on 24 March when the transcript is released.
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