MARKET OUTLOOK - Wage Increases and a Weak Yen Support Expectations for BOJ Rate Hike

Sony Financial Group economist Takayuki Miyajima stated that Japan's recent monthly wage data supports market expectations that the Bank of Japan will raise interest rates in December. The data shows that planned cash earnings, excluding bonuses and overtime pay, increased by 2.4% in August and continued to rise by 2.6% year-on-year in September. Miyajima noted, "Since wages have been in line with the BOJ's forecasts, this outcome could serve as a factor encouraging an additional rate hike in December."

Daiwa Securities strategist Ryoma Kawahara also mentioned that the weakness in the yen triggered by Donald Trump's victory could increase the likelihood of an interest rate hike by the Bank of Japan soon. Kawahara stated, “Because the dollar rate has surpassed the level of around 150 yen from a year ago, further increases are likely to push up Japan’s import prices.” He also pointed out that expectations of a rate hike could spur an increase in JGB yields, which have not fully accounted for the possibility of additional rate hikes. The BOJ's policy-setting meeting is scheduled to take place on December 18-19.