USD/JPY: Yen Edges Higher as Japan’s Household Spending Declines

01/10/2025

1 minute read

2025.01.10 06:55

The yen is slightly higher on Friday. In the European session, is trading at 157.89, down 0.12% on the day.

Japan’s Household Spending Continues to Decline

Japanese consumers are holding tight on the purse strings and that could spell trouble for Japan’s fragile economy. Annually, declined by 0.4% in November, following a 1.3% decline in October and above the market estimate of -0.6%. This marked a fourth straight decrease. Spending was weak in most categories, with the exceptions of housing and education. Monthly, household spending rose 0.4%, well below the October gain of 2.9%, which was a 14-month high. The reading easily beat the market estimate of -0.9%.

The household spending report comes on the heels of the November wage growth report, which was mixed. Nominal wages jumped 3% but real wages, which are adjusted for inflation, came in at -0.3%, marking a fourth consecutive month of negative real wage growth.

US Nonfarm Payrolls Expected to Decelerate

The US wraps up the week with for December. With inflation largely in check, the Federal Reserve is keeping a close eye on the health of the labor market as the Fed reduces interest rates. The labor market has been cooling slowly but not deteriorating too quickly and the Federal Reserve would like to keep it that way. Nonfarm payrolls are expected at 160 thousand, after a gain of 227 thousand in November.

The Federal Reserve minutes had little impact on the movement of the US dollar but were significant in reiterating that the Fed plans to go slow on rate cuts in 2025. The minutes raised concern about the upside risk of inflation due to Trump’s pledges to enact tariffs and respond to illegal immigration with mass deportations. The Fed can be expected to gradually cut rates, which likely means increments of 25 basis points. USD/JPY-4-Hour Chart