Japanese Yen and Australian Dollar News: Household Spending and Wages in Focus

Household Spending and Wage Growth Impact BoJ Rate Hike Bets

The Bank of Japan’s (BoJ) December policy move: How will household spending and wage growth figures influence the BoJ and the USD/JPY pair?

On Friday, December 6, household spending and wage growth figures put the Bank of Japan under the spotlight.

Household spending surged by 2.9% month-on-month in October after sliding by 1.3% in September. A pickup in private consumption could fuel demand-driven inflation. Additionally, private consumption contributes over 60% to Japan’s economy, indicating a positive start to Q4.

Higher inflation and a positive economic outlook would allow the Bank of Japan to raise interest rates. Monetary policy adjustments aim to deliver price stability.

However, wage growth trends are also crucial for the Bank of Japan. Average cash earnings grew by 2.6% year-on-year in October, down from 2.8% in September.

Softer wage growth could overshadow the upbeat household spending figures. Weaker wage growth may lower disposable income, dampening consumer spending and inflationary pressures. To assess inflation and household spending trends, the BoJ could delay an interest rate hike until Q1 2025.

Forward Guidance and Expert Views on the BoJ Rate Path

Uncertainty lingers about December’s BoJ monetary policy decision.

On Thursday, BoJ policymaker Toyoaki Nakamura downplayed the chances of a December rate hike, expecting inflation to remain below the Bank’s 2% target. Nakamura also doubted wage growth would be sustainable.

Meanwhile, BoJ Governor Ueda offered a contrasting view, highlighting higher inflation and economic alignment with the Bank’s targets. Tokyo’s core inflation rate increased from 1.8% in October to 2.2% in November, surpassing the BoJ’s 2% target. The inflation data boosted expectations of a December rate hike.

The contrasting views highlight the division within the BoJ regarding further rate hikes.

Japanese Yen Daily Chart

Shifting the focus to Friday’s US session, the crucial US Jobs Report will impact the USD/JPY pair. Labor market conditions dictate wage growth trends, potentially influencing consumer spending and demand-driven inflation.

Softer wage growth, a higher unemployment rate, and a lower-than-expected rise in nonfarm payrolls would signal a more dovish Fed rate path. Looser labor market conditions could dampen consumer spending and demand-driven inflation.

The USD/JPY could drop toward 148.5 on expectations of multiple Fed rate cuts. Conversely, better-than-expected data may drive the pair toward 151.5 on falling bets on a December Fed rate cut.

AUD/USD and Home Loans

Turning to the AUD/USD pair, Aussie housing credit figures will draw interest amid falling bets on a Q1 2025 RBA rate cut. Economists expect home loans to increase by 0.3% month-on-month in October after rising by 0.1% in September. Furthermore, economists forecast investment lending for homes to rise 0.4% after sliding by 1% in September.

The October figures could indicate continued availability of credit and increased demand for residential properties. While rising demand could lift property prices, a growing supply of rental properties may ease rental inflation.

Rental rates are significant for the RBA as housing services inflation remains a key contributor to inflation. Falling rents may ease inflation, supporting a Q1 2025 RBA rate cut. A more dovish RBA rate path may pull the AUD/USD pair toward $0.64000.

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Australian Dollar Daily Chart

In the US session, the US labor market will be under the spotlight. Softer wage growth and rising unemployment could dampen consumer spending and demand-driven inflation. Lower inflation would support a more dovish Fed rate path.

Expectations for a narrowing in the interest rate differential between Australia and the US could drive the AUD/USD pair toward $0.65. On the other hand, a steady unemployment rate and larger-than-expected wage growth may delay a Fed rate cut, potentially pulling the pair below $0.64.

Other stats include the University of Michigan Survey of Consumers. However, barring an unexpected drop below 100, the numbers will likely play second fiddle to the US Jobs Report.

Monitoring Global Monetary Policy Speculation

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