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Economic Impact Of Wage Increases
Small and midsized businesses, accounting for 70% of Japan’s workforce, are being monitored to see if they can match these improvements.
At the time of reporting, the USD/JPY currency pair had risen by 0.17%, trading at 148.02.
The Japanese Yen’s value is influenced by the country’s economic performance, the Bank of Japan’s policies, yield differentials between Japanese and US bonds, and overall market risk sentiment. The Bank of Japan has historically maintained an ultra-loose monetary policy, contributing to the Yen’s depreciation against major currencies.
Recent decisions to gradually unwind this policy are offering support to the Yen. In the past decade, the divergence of monetary policies between the Bank of Japan and the US Federal Reserve has widened the yield gap, with rising support for the US Dollar.
Shifts In Monetary Policy
The Yen is perceived as a safe-haven asset, typically gaining strength during market turbulence when investors seek stability.
Wages in Japan’s largest firms continue to trend upwards, a development that directly impacts both household spending and broader economic growth. Over the past three years, major corporations have committed to higher pay rises, helping workers maintain purchasing power despite inflationary pressures. The latest proposals from Rengo suggest even greater increases than in previous rounds, a move that reflects both rising costs of living and attempts to retain workers in a tightening labour market. Denso and other major employers have already agreed to set new records in this area.
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