The latest wage data from Japan will have been disappointing for the BoJ who are looking for stronger wage growth to support a sustained pick-up in inflation towards their 2.0% target. The report revealed that labour cash earnings increased by an annual rate of just 1.0% in April down from 1.3% in March, and much lower than the consensus forecast for an increase of 1.8%. 

The report is a setback for the BoJ and will reinforce market expectations for the BoJ to maintain current loose policy settings at this month’s policy meeting on 16th June and for the rest of this year unless evidence of much stronger wage growth emerges in the coming months.

Without a shift in BoJ policy, the Yen is more likely to continue trading at weak levels.