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Is inflationary pressure squeezing people's wallets? "Dangerous gambling" in the high market may drag on Japan's doomsday cycle
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: Is inflationary pressure squeezing people's wallets? "Dangerous gambling" in the high market may drag on Japan's doomsday cycle." Hope this helps you! The original content is as follows:
Only a few weeks after taking office, Japanese Prime Minister Sanae Takaichi is facing the challenge of falling real wages. This economic threat points directly to his "Abenomics" policy line.
The latest data released by Japan’s Ministry of Health, Labor and Welfare show that real wages fell for the ninth consecutive month in September. Since 2021, real wages have continued to show negative year-on-year growth, highlighting the pressure on household purchasing power.
It is true that nominal wages continue to rise, but inflation erodes real incomes. September data showed that nominal wages rose by 1.9% year-on-year, but real wages fell by 1.4% year-on-year.
Takaichi Sanae pledged to revive the spirit of "Abenomics," a policy promoted by the late Prime Minister Shinzo Abe that is based on three pillars: ultra-loose monetary policy, active fiscal stimulus and structural reforms.
Stimulus policy is in dilemma, fiscal space is under torture
It is said that Takaichi Sanae has begun planning. The Japanese government will launch an economic stimulus plan of 13.9 trillion yen (approximately 92.2 billion U.S. dollars), aiming to alleviate the pressure of rising prices on people's lives.
According to Nikkei, the package totals more than 10 trillion yen and includes electricity and fuel subsidies, as well as special assistance to help small and medium-sized enterprises increase their wage levels.
But these spending plans may conflict with Japan's general direction of fighting inflation.
Japan’s core inflation rate has exceeded the central bank’s 2% inflation target for 41 consecutive months, with a year-on-year increase of 2.9%. Household expenditure data in September increased by only 1.8%, falling short of the 2.5% expected by economists.
MarcelThieliant warns: “Polls showInflation has become a top concern for Japanese voters. If Takaichi Sanae adopts populist measures such as energy subsidies or cash handouts in response, it will only further exacerbate inflationary pressures. "
Japan may also have limited fiscal space to deal with inflation. Analyst Justin Feng said that a very large stimulus plan funded by national debt "could weaken Japan's fiscal credibility."
International Monetary Fund data shows that as of 2023, the country's debt-to-GDP ratio is as high as Nearly 250%, ranking among the highest in the world.
High inflation may force Koichi Sanae to downplay its expansionary monetary policy stance, which advocates maintaining low interest rates, because this may cause the yen to weaken and push up the cost of imported goods.
Feng pointed out: "The latest real wage data reflects Japan's continued inflationary pressure. If the Bank of Japan does not take proactive measures in a timely manner, it may face the risk of falling behind the situation. "
The Bank of Japan is in deep policy troubles and is forced to raise the threshold for raising interest rates
The Bank of Japan kept its benchmark interest rate unchanged at 0.5% last month. Governor Ueda is said to have said that the central bank is "not behind the curve" in dealing with inflation.
Although its attitude has softened xmxyly.compared with last year's sharp criticism of the Bank of Japan's policy tightening actions, the high market is reported to have Parliament said earlier this month that the country has not yet achieved sustainable inflation, indicating that the central bank should slow down the pace of interest rate increases.
The Bank of Japan said it would start raising interest rates once it observes that prices and wages have entered a "virtuous cycle" of upward trajectory.
Feng said: "Under the new political landscape, the threshold for tightening monetary policy by the Bank of Japan has now been raised. "
But this does not mean that the Bank of Japan will stop here. Feng added: "The current process of policy normalization will gradually continue. In our view, the question of future interest rate hikes is only the timing, not whether they will be implemented. ”
Capital Economics predicts that the Bank of Japan will raise the policy interest rate to 1.5% by 2027.
Analysts said that curbing inflation will become the top priority of the Gao City Government, and some people believe that the Bank of Japan policy members have called for raising interest rates to deal with inflationary pressure.
Japan has a large number of people who rely on pensions For pensioners and fixed-income groups, inflation is "extremely painful" for them.
Experts from MonexGroup Financial Services also said: "If Japan's inflation rate still fails to fall below 2% in six to nine months, the support rate of this cabinet will drop sharply, because for the Japanese people...their top three issues of greatest concern all stem from inflation. ”
The differentiation between the United States and Japan boosted the exchange rate, and technical indicators tended to rise
On Monday (November 10), the U.S. dollar against the yen continued the previous day’s gains. The U.S. dollar fluctuated upward during the Asian market session, rising by about 0.37% to around 153.97.
As for the U.S. economy, the 40-day government shutdown ushered in tomorrow.In a sign of improvement, the Senate reached an agreement to extend the government appropriations bill until January 30, which indicates that the government shutdown may be xmxyly.coming to an end, which may boost the US dollar in the short term to a certain extent, thereby providing impetus for USD/JPY bulls.
From Japan's perspective, Tuesday's 30-year government bond auction is a key event, especially since Japanese Prime Minister Sanae Takaichi has released a signal to implement a looser fiscal policy than his predecessor. Weak demand could derail plans to implement more reflationary policies, leading to weakness in long-term bonds and the yen. The PPI data released on Thursday is also worthy of attention, as it can provide guidance for upstream price pressures - these pressures may eventually be transmitted to the consumer side, affecting the policy prospects of the Bank of Japan.
The daily chart shows that the USD/JPY is significantly affected by the rising upward trend line. At the same time, momentum indicators such as the relative strength index (RSI14) and MACD are clearly in the positive range, indicating that short-term bulls may be dominant, making the currency pair present a bullish trend, and the directional risk is slightly upward.
On the downside, if it falls below the 153.00 mark, we need to focus on the two support levels of 151.50 and 151.00, especially the latter.
On the upside, if it can break through the resistance of 154.50, the next target of the bulls will be 156.50.
The above content is all about "[XM Foreign Exchange Market Analysis]: Is inflationary pressure squeezing people's wallets? "Dangerous gambling" in the high market may drag Japan's doomsday cycle". It is carefully xmxyly.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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