USDJPY Remains Volatile As Earnings Increase, Spending Falls

The divergence in monetary policies between the Federal Reserve and the Bank of Japan is further impacting USDJPY besides other things. The BOJ raised rates by 15 basis points last week, and the latest BOJ minutes suggest another hike may be on the horizon. Meanwhile, market expectations are growing for the FED to cut rates by 50 basis points in September, with additional cuts anticipated in the coming months.

With the Nikkei down more than 8%, the markets plunged in panic, and traders are gravitating towards safe-haven currencies such as the JPY and the CHF. Market sentiment is crucial during times like these, so no one knows when the selling pressure will likely subside, but it stabilized late in the day. However, attempting to time the market and pick a bottom is futile; as the saying goes, you should never try to catch a falling knife. Technically, there isn’t much preventing the USD/JPY from continuing its drop toward the December low which comes just above 140.

Early today we had the Cash Earnings and Household Spending from Japan. While earnings showed a decent increase, after the wage negotiations in March-April, spending declined year on year, which shows caution by the Japanese consumers.

Japanese Average Cash Earnings And Household Spending

Labour Cash Earnings

• Labour Cash Earnings +4.5% y/y vs expected +2.4%
• Previous Labour Cash Earnings +2.0%
• Real Cash Earnings +1.1% y/y vs expected -0.9%
• Previous Real Cash Earnings -1.3%

Spending Data

• Japanese Household Spending for June 2024 +1.1% m/m vs expected +0.2%
• Previous Japanese Household Spending m/m -0.3%
• Japanese Household Spending for June -1.4% y/y vs expected -0.9%
• Previous Household Spending y/y -1.8%

USD/JPY Live Chart