USD/JPY is trading just above 154.00 after dropping 1.22% on Monday, a day when US markets were closed [1]. The focus now shifts to Japanese wage data, scheduled for release at 23:30 GMT, which the Bank of Japan (BoJ) has made central to its policy decisions [1]. The expected figure for Japanese labour cash earnings in July is 3.9% year-on-year, up from 3.4% previously [1]. This nominal wage increase, compared to a deflator seen at 2.6%, would represent a real gain—a development Japan has struggled to achieve for decades [1]. The second estimate of Japanese GDP will follow at 23:50 GMT, with growth seen at 0.4% quarter-on-quarter, up from 0.3%, and the current account is expected at ¥2.87 trillion after a ¥92.3 billion deficit [1].
Market pricing indicates that a September BoJ rate hike is almost fully priced in at close to 97%, leaving little room for further movement this month [1]. However, October remains less certain, with a BoJ board member having raised the possibility of consecutive rate hikes, breaking from the usual one-every-six-months cadence [1]. The ten-year Japanese Government Bond (JGB) yield surpassed 3% on September 1 for the first time since 1996, signaling that the bond market has already responded to these expectations [1].
The Federal Reserve and BoJ will hold their respective meetings on September 16 and 18, just forty-eight hours apart [1]. Swaps show the Japanese quarter-point hike at close to 97%, while the Federal Reserve's own market pricing puts its quarter-point hike at 59%, with the target band at 3.50% to 3.75% and the effective rate at 3.63% [1]. This marks a reversal from previous years, with Tokyo now seen as the near certainty and Washington as the open question [1].
Recent market action has been volatile. US Nonfarm Payrolls (NFP) printed 162K against a 53K consensus, causing USD/JPY to spike to just under 157.00 within seconds of the release, only for the move to be erased within the hour [1]. Monday's session saw USD/JPY drop 1.22% as US markets were closed [1]. The market now appears to have priced in all near-term Yen-side developments, with attention focused on which central bank will shift its policy path first and by how much after their respective meetings [1].
CONCLUSION
The Japanese Yen is poised for significant movement as wage data and upcoming BoJ and Federal Reserve meetings dominate market attention. With a September BoJ rate hike nearly fully priced in and the possibility of consecutive hikes being discussed, the market impact is high. Investors are now watching for which central bank will adjust its policy trajectory first, as volatility remains elevated.