Investing.com – The yen will likely continue to drag its heels against the dollar, MUFG says, as the latest economic Japanese data showing weaker wage growth is expected to keep the Bank of Japan leaning dovish at the policy meeting next week.
USD/JPY was up 0.1% to 139.66.
Without a shift in BoJ policy to a less dovish stance, the yen is “more likely to continue trading at weak levels,” MUFG said following weaker-than-expected wage data overnight Tuesday.
Real wages in Japan dropped 3.0% from a year earlier in April, the labor ministry reported Tuesday, steeper than the 2.0% economists had expected 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,” MUFG added.
The weakness in April was driven by a "drop in overtime earnings, which fell for the first time in more than two years, and subdued bonus payments growth," Daiwa Capital Markets said in a note.
The yen’s breach of 140 against the greenback on Monday had stoked talk that the central bank could intervene to prop up the currency following a similar move last year when the yen topped 150 against the dollar.
But the latest data is a setback for the BoJ, MUFG says, as the central bank was expecting that the recent round of agreements by labor unions and employers to hike wages would have been reflected in the data.
“The BoJ has been expecting around 40% of the wage negotiation results to have been reflected in April with the number rising to more than 80% by July,” according to MUFG.