Ella 
USD/JPY was significantly higher during the session on Wednesday, reaching a high of 145.80 and approaching the key resistance level of 146.00 as the market prepared for Thursday’s Asian trading session. USD/JPY rose as disappointing Japanese wage data released earlier in the day caused the yen to weaken sharply across the market. As a result, the yen fell across the board on Wednesday.
Japan faces a challenging economic situation, with nominal wages rising 0.2% in the year to November but real earnings falling 3%. Persistent inflation is eroding consumers’ income and purchasing power, leading to an economic downturn.
Prospects for the Bank of Japan to condition interest rates on real wage growth are diminishing. This caused the yen to weaken and triggered another massive flight out of the yen.
Nominal wages in Japan increased by 0.2%, but real wages fell by 3%
Despite the ongoing impact of inflation on real wages in Japan, the Bank of Japan maintains a highly accommodative monetary policy, keeping interest rates at a slightly negative value close to -0.1%. The cautious stance stems from concerns that inflation will fall below the 2% threshold in 2025. Inflation in Japan was at an annual rate of 2.8% in November, down from a peak of 4.3% in January the previous year.
Looking ahead, USD/JPY is likely to gain more momentum on Thursday as the U.S. is set to release its latest consumer price index (CPI) inflation data for December.
Headline U.S. inflation is expected to rise slightly from 0.1% to 0.2%. Inflation is expected to climb to 3.2% annually through December from 3.1%.
