Japan needs to continue monitoring the inflation rate.

The yen is still depreciating due to its monetary policies that are in contrast with many countries worldwide. Japan has been striving for inflation after experiencing deflation for many years. Although there have been announcements of depreciation in recent months, with a continuous downward adjustment, the currency is still not within the target range. However, the central bank of Japan has indicated a slight policy adjustment in the coming month.

The Ministry of Labor in Japan has revealed that the basic wages in the country increased at the fastest rate in 28 years in May. This has led to discussions about whether the Bank of Japan (BOJ) will discontinue its special monetary easing measures at any time. While a weak yen can stimulate the economy effectively, if there are no changes regarding the measures to accelerate inflation, it is certain that currency depreciation issues will follow.

It was found that wages within the country increased by 1.8% on an annual basis in May, which is the highest growth rate since February 1995. The increase in basic wages has resulted in a 2.5% rise in overall cash earnings or wage income in May, following a 0.8% increase in April.

Although there has been an overall increase in both wages and basic wages, the actual wage decreased by 1.2% in May, marking the 14th consecutive monthly decline when compared on a monthly basis. This reduction is attributed to the continuous depreciation of the currency over the past few months, which has offset the wage increases in numerical terms and the declining purchasing power of households. It is expected that the actual wages will continue to shrink throughout the year.

Former Chief Economist of the Bank of Japan (BOJ), Mr. Izakku Kamada, stated, "BOJ may raise its inflation forecast for this year, but it is highly likely that BOJ will not adjust its yield curve control (YCC) policy during the policy meeting on July 27-28."

Currently, the BOJ continues to implement the YCC policy, which involves keeping the short-term interest rate at around -0.1% and maintaining the yield on 10-year Japanese Government Bonds (JGB) at approximately 0%. Mr. Kamada mentioned that although there is no inclination to adjust the YCC policy in July, there might be some adjustments to the details of YCC in the upcoming months of this year if the BOJ sees that the inflation rate remains high and receives stimulus from wage increases.

Technical analysis data (5H)