Yen faces selloff following wages data

The Japanese Yen is experiencing a selloff due to a 3% drop in real wages for the year ended November, despite a 0.2% increase in nominal wages. This is due to inflation affecting consumers’ earnings and purchasing power.

The Bank of Japan is hinting at rate hikes based on rising real wages, but this has led to the Yen skidding across the floorboards and potentially causing another long-run flight out of the JPY.

The BoJ is still in a hyper-easy monetary policy stance, keeping rates slightly negative at or near -0.1%. Japanese annual inflation currently stands at 2.8% through last November, declining from a peak of 4.3% in January of last year. The US will publish its latest Consumer Price Index (CPI) inflation figures for December, with headline CPI inflation expected to rise slightly from 0.1% to 0.2% and annualized inflation from 3.1% to 3.2%.

Investors are looking for signs of US inflation receding, while an upside beat to CPI inflation prints could drive the US dollar even higher against major rival currencies.