Yen likely set for pain against dollar as wage data to keep BoJ policy loose By Investing.com

Investing.com – The yen is likely to continue to soften against the dollar, MUFG says, as recent Japanese economic data showing weak wage growth is expected to keep the Bank of Japan tilted dovishly at next week’s policy meeting.

It increased by 0.1%, to 139.66 points.

Without a shift in BoJ policy to a less dovish stance, the yen is likely to continue trading at weak levels, MUFG said following weaker-than-expected wage data Tuesday night.

Real wages in Japan fell 3.0% from a year earlier in April, the Labor Ministry reported Tuesday, which is sharper than the 2.0% drop economists had expected and would bolster market expectations for the Bank of Japan to maintain its current accommodative policy settings at this month’s policy meeting on the 16th. the month. June and the rest of this year, MUFG added.

Daiwa Capital Markets said in a note that the weakness in April was driven by lower overtime earnings, which fell for the first time in more than two years, and lower bonus payout growth.

The breach of 140 yen against the dollar on Monday fueled talk that the central bank may intervene to support the currency after a similar move last year when the yen crossed 150 against the dollar.

But the latest data represents a setback for the Bank of Japan, says the MUFG, as the central bank had been expecting that the latest round of agreements between trade unions and employers to raise wages might be reflected in the data.

According to the MUFG, “The Bank of Japan expected the outcome of wage negotiations to reverse by 40% in April with the number rising to more than 80% by July.”