It Feels Like a Japanese Morning Today

Posted Friday, October 21, 2016 by
Skerdian Meta • 1 min read

Ohay doshi everyone. That's goodmorning guys in Japanese or goodmorning mates, something in those lines. There's a scent in the air this morning which reminds me the only time I visited the country.

Maybe it's becuase I was reading about the BOJ governor Kuroda last night before hitting the bed. He was supposed to open the day for Asian traders but the biggest labour union in the country beat him to it. They demanded that the wages go up by 2% by next year. That's a reasonable request and the 2% target will be used by other unions when formulating their demands.

The Japanese government supports wage increases as well becuase it will help the consumer demand and inflation as well. But, the 25% JPY appreciation this year has made things all the more difficult for everyone there. The company profits have been slashed, so the firms can't hike the wages enough to support sustainable economic growth. That seems like a vicious circle to me.

Anyway, Kuroda came up next. Blabbering a few dovish lines would have helped the JPY sellers and would help the Japanese exporters too, but for the first time he decided to sound positive. He said that the 2% inflation target is easily achievable.

Am l bonkers or have I missed something very important recently? Japan was in deflation a couple of months ago and inflation is still close to zero, despite the higher oil prices. Those comments sent USD/JPY about 40 pips lower but the forex market seems to have let him go easy this time. It's probably the anticipation of a rate hike by the FED which is keeping this forex pair afloat, because the BOJ seems to have thrown the towel.

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