Relationship between wage trends in Japan and the dollar-yen exchange rate: the current state of the economy deciphered from the latest data
Labor statistics for 2024/5 have been announced, and attention is being drawn to wage trends in Japan.
The latest wage data and its background, and the impact on the dollar to yen exchange rate will be analyzed in detail.
✔️ The growth in prescribed salaries and the current state of real wages
The prescribed salary (basic salary) increased 2.5% compared to the same month last year. This is the first high growth rate in about 31 years since 1993. In particular, wage increases in this year's Spring Battle (spring labor-management negotiations) are reflected. Meanwhile, real wages reflecting price fluctuations declined by 1.4%, and have been negative for 26 consecutive months. Negative real wages over this long period of time have become the longest record ever, and price increases have surpassed wage increases.
✔️ The increase in nominal wages and its background
The total amount of cash salary, including basic salary and overtime pay, averaged 0.29 million7151 yen per person, an increase of 1.9% from the same month last year. It has been positive for 29 consecutive months, showing an improvement in the labor market. It is thought that the background is that companies are raising wages to secure human resources.
✔️ Chief Cabinet Secretary Hayashi's opinion
It aims to strongly support wage increases in small and medium-sized enterprises and establish social awareness that wage increases are a matter of course. Wage increases are gradually being implemented, and it is necessary to keep a close eye on future wage trends.
✔️ Impact on the dollar to yen exchange rate [educational opinion 💡]
Wage trends in Japan are one of the factors that have a major impact on the dollar to yen exchange rate. The impact on the dollar-yen exchange rate will be examined, centering on the following points.
✔️ Bank of Japan Monetary Policy
As real wages continue to decline, there is a growing possibility that the Bank of Japan will take additional monetary easing measures. So to speak, this is a factor in the depreciation of the yen. Meanwhile, the US Federal Reserve (Federal Reserve) is expected to continue raising interest rates to control inflation, and there is a possibility that the trend of dollar appreciation and depreciation of yen will intensify as interest rate differences between Japan and the US widen.
✔️ American Economic Indicators
While strong employment statistics and inflation indicators support the Fed's interest rate hike, it is expected that interest rate differences will widen as the Bank of Japan continues its mitigation policy, and the appreciation of the dollar and the depreciation of the yen will progress. When geopolitical risks increase, yen may be bought as a safe asset, but the impact is limited in the current economic environment.
(*Technical analysis will be shared live.)
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