Rengo Wages Outcome Higher Than Expected, But Little Benefit To Yen

The main focus late on Friday Asia Pac time was the Rengo wage announcement. It printed stronger than expected at 5.28%, with a number of sell-side analysts looking for a low 5% outcome. It was also comfortably above the initial outcome for last year's wages agreement (3.8%). A number of new wires (Kyodo and Nikkei) posted reports (after the wages announcement) that the central bank will raise the policy rate to the 0%-0.1% range at Tuesday's policy announcement.

• Still, the follow on benefit to yen was very limited. USD/JPY fell close to 148.00 but spent much of the post Asia close pushing higher. We got to highs of 149.17, with yen losing nearly 0.50% for Friday's session. The pair starts Monday trade near 149.10.
• For the BOJ, an expected commitment to continued bond-buying is seen stabilising markets through the first potential Japanese rate hike for decades. This also fits with recent BOJ comments that an aggressive rate hike cycle was unlikely.
• In the cross asset space, a firmer US yield backdrop also aided broader USD sentiment (BBDXY up 0.17% for Friday). The 2yr yield back close to YTD highs (ending last week at 4.73%), amid signs of sticky inflation pressures.
• In terms of technicals for USD/JPY, this extends the recovery off the early March base, with the pair printing higher lows for five consecutive sessions and the pair breaching 148.82, the 20-day EMA. As we await next week’s BOJ and Fed decisions, a clear break and close above this average could suggest scope for a move towards 150.08, the Mar 6 high.
• On the data front today we have core machine orders, but the main focus will be tomorrow's BoJ outcome. In the option expiry space note the following for NY cut later: Y146.50-60($1.3bln), Y147.00($1.4bln), Y147.35-50($2.4bln), Y148.00($634mln), Y148.30-50($1.2bln), Y149.00($965mln), Y149.50-55($750mln), Y149.70-75($600mln), Y150.00-20($986mln).