Deutsche Bank analysts underscore that stronger Japanese wage data and resilient household spending are reinforcing expectations for Bank of Japan (BoJ) tightening. Real and nominal wages are rising at the fastest pace since 2024, with futures pricing a high probability of a June hike.

Rising wages support policy normalisation

"Early morning data revealed that Japan’s real wages rose by +1.9% in April (compared to +1.7% anticipated) y/y, contributing to a smaller-than-expected decline in household spending."

"In a separate report, Japan’s household spending decreased by -0.5% year-on-year in April, a less severe decline than the expected drop of -1.5%, following a -2.9% decrease in the previous month."

"Average nominal wages, or total cash earnings, increased by +3.5% year-on-year (against +3.1% expected). This figure represents the fastest wage growth since December 2024, following a revised increase of +3.1% in March."

"The April data marks the first instance in over 34 years where wage growth has surpassed 3% for three consecutive months."

"The meeting on the 16th of this month now sees a 96% probability of a hike according to futures."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)