USD/JPY Daily Forecast: Japan Household Spending, BoJ Rate Path Impact on Price

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Published: Sep 5, 2024, 23:00 GMT+00:00

Key Points:

Japan’s household spending rise may influence BoJ rate hikes, potentially pulling USD/JPY down to 141.
Bank of Japan’s Hajime Takata warns against early rate hikes, but economic alignment may drive future hikes.
US Jobs Report expected to show lower unemployment, impacting Fed rate path and USD/JPY movement toward 145.

Japan Household Spending and the BoJ Rate Path

On Friday, September 6, household spending figures from Japan could influence the USD/JPY pair and the Bank of Japan rate path.

Economists expect household spending will increase by 1.2% year-on-year in July, following a 1.4% decline in June.

Upward trends in household spending may fuel demand-driven inflation, possibly raising expectations of a Q4 2024 BoJ rate hike. Better-than-expected figures could pull the USD/JPY down toward 141.

Household spending pivotal for the BoJ rate path.

FX Empire – Household Spending

Bank of Japan Forward Guidance on Monetary Policy

On Thursday, September 5, Bank of Japan Board Member Hajime Takata reportedly warned about hiking interest rates too soon. Despite concerns about the timing, Takata supported further rate hikes if the economy and price trends align with expectations.

Expert Views on Inflation and BoJ Rate Path

Blokland Smart Multi-Asset Fund founder Jeroen Blokland commented on Thursday’s wage growth figures, stating,

”Year-on-year real wage growth in Japan was positive for the second consecutive month, which was a surprise. This likely fuels the Yen Carry Trade anxiety as this would allow a central bank pursuing sound monetary policy to hike rates. The Bank of Japan is known for its extraordinary policy. Still, with a totally unrealistic inflation target of 2%, even this central bank has to make it look like it pays attention to this target now and then.”

Average cash earnings increased by 3.6% year-on-year in July, beating expectations of a 3.1% rise.

Wage growth supports a more hawkish BoJ rate path.

FX Empire – Average Cash Earnings

US Economic Calendar

Later in the session on Friday, the highly anticipated US Jobs Report will draw investor interest. After the recent shift in focus to labor market conditions, the US unemployment rate, and nonfarm payroll figures may heavily influence the Fed rate path and the USD/JPY pair.

Economists expect the US unemployment rate to fall from 4.3% in July to 4.2% in August. A lower unemployment rate further could ease investor fears of a hard landing (recession) for the US economy. Tighter labor market conditions could boost wages and consumer spending, contributing over 60% to GDP.

Additionally, economists predict nonfarm payrolls will increase by 160k in August, up from 114k in July.

Better-than-expected nonfarm payrolls and a lower unemployment rate may cut bets on a 50-basis point September Fed rate cut. A less dovish Fed rate path may push the USD/JPY toward 145.

Expert Views on the US Labor Market and the Fed Rate Path

BCA Research Chief Global Strategist and Director of Research commented on Thursday’s weekly jobless claims figures, stating,

“Unemployment claims come in better than expected. Claims display strong seasonal patterns and normally decline at this time of the year. While initial claims are similar to where they were in recent years (ex pandemic), continuing claims still look slightly elevated.”

Short-term Forecast: Bearish

USD/JPY trends will hinge on the household spending figures from Japan and the US Jobs Report. Higher-than-expected wage growth figures from Japan may boost bets on a Q4 2024 BoJ rate hike, supporting a USD/JPY drop toward 141. However, better-than-expected US labor market data may cement bets on a 25-basis point Fed rate cut, possibly indicating a USD/JPY move toward 145.

Investors should remain alert as Friday’s data will influence the BoJ and the Fed’s rate paths. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY stood well below the 50-day and 200-day EMAs, sending bearish price signals.

A USD/JPY breakout from the 143.495 resistance level would support a return to 145. A return to 145 could signal a move toward the 145.891 resistance level.

Household spending figures from Japan and the US Jobs Report require consideration.

Conversely, a drop below the 142.500 level could bring the 141.032 support level into play.

The 14-day RSI at 34.99 indicates a USD/JPY break below 143 before entering oversold territory.

USD/JPY Daily Chart sends bearish price signals.

USDJPY 060924 Daily Chart

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.