Daily Digest Market Movers: Japanese Yen regains positive traction amid renewed BoJ rate hike talks
- Expectations that Japan's biggest companies will offer sizeable pay increases and clear the way for the Bank of Japan to end its negative interest rates as early as next week lend some support to the Japanese Yen.
- In fact, Japan’s largest umbrella group for unions, Rengo, said that its affiliated members demanded an average wage increase of 5.85% this year, which, in turn, would mark the biggest increase in around 31 years.
- In the latest development, Toyota responds to Union wage hike demand in full, while Okuma Corp hikes wages by ¥15,960 vs. union demand of ¥18,215, raising the question if the hikes are enough to justify BoJ tightening.
- According to people familiar with the matter, the assessment of BoJ officials is that the central bank is close to liftoff, regardless of whether the first interest rate hike since 2007 comes in March or April policy meeting.
- BoJ Governor Kazuo Ueda said on Tuesday that the central bank will seek an exit from easy policy when achievement of 2% inflation is in sight, smashing hopes for an imminent shift in the policy stance next week.
- Data released from the US showed that the headline Consumer Price Index (CPI) rose 0.4% in February, while the yearly rate came in at 3.2% as compared to January's final print and market expectations of 3.1%.
- Annual Core CPI, which excludes volatile food and energy prices, increased 3.8% during the reported month, slightly below the January rise of 3.9% but was above consensus estimates for a reading of 3.7%.
- The slightly warmer US consumer inflation figures boosted the US Treasury bond yields, which should act as a tailwind for the US Dollar and help limit any meaningful depreciating move for the USD/JPY pair.
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