Japanese Yen and Aussie Dollar News: Japan’s Household Spending Boosts BoJ Hike Bets

Household Spending Spotlights the USD/JPY and the BoJ

On Friday, February 7, Japan’s household spending data influenced USD/JPY trends and the Bank of Japan rate path.

Household spending rose 2.3% month-on-month in December after increasing by 0.4% in November. Upward household spending trends could fuel demand-driven inflationary pressures, supporting expectations of a more hawkish BoJ stance.

The pickup in household spending coincided with a December surge in average cash earnings, signaling a jump in private consumption. Average cash earnings soared 4.8% year-on-year in December, up from 3.9% in November.

East Asia Econ remarked on Japan’s wage growth trends, saying:

“Japan -part-time wage growth at 4.6%. Full-time worker wage growth remains stable at a bit under 3%. Further acceleration is likely, though not much: this year’s shunto will probably moderate from 2024. Part-time worker wage growth is though continuing to rise, consistent with the BOJ’s view of a tight labour market.”

Bank of Japan Governor Kazuo Ueda and Deputy Governor Himino recently hinted at another rate hike if the economy and prices align with the BoJ’s projections.

USD/JPY Movements

USD/JPY remains responsive to economic indicators and central bank guidance. The USD/JPY moved to a low of 150.951 following data supporting hawkish BoJ expectations.

USD/JPY Trends: US Labor Market in Focus

Shifting to the US, the US Jobs Report will influence sentiment toward the Fed rate path. Economists expect average hourly earnings to rise 3.8% year-on-year in January, down from 3.9% in December. Additionally, economists forecast the US unemployment rate will remain steady at 4.1%.

Softer wage growth and rising unemployment could signal a potential pullback in consumer spending, dampening inflationary pressures. A softer inflation outlook may raise expectations of an H1 2025 Fed rate cut, potentially pulling the USD/JPY pair toward the 149.358 support level.

Conversely, a lower unemployment rate and rising wages may support a more hawkish Fed rate path. Falling bets on an H1 2025 Fed rate cut may drive the pair above the 200-day EMA 153 level toward the 50-day EMA.

Explore in-depth USD/JPY trade setups and expert forecasts here.

The AUD/USD: US Tariffs and China in Focus

For the Australian dollar, US tariff developments will continue influencing AUD/USD trends.

On February 6, Australia’s trade surplus narrowed from A$6.792 billion in November to A$5.085 billion in December. Significantly, exports rose 1.1% month-on-month, down from 4.2% in November, reflecting softer overseas demand.

An escalation in the US-China trade war could further impact Australian trade terms. Australia has a trade-to-GDP ratio of over 50%, with 20% of its workforce in trade-related jobs.

Given that China accounts for one-third of Aussie exports, a full-blown US-China trade war could impact Aussie exports, the economy, and the RBA rate path.

In December, RBA Governor Michele Bullock commented on President Trump’s policies, China, and the Australian economy, stating:

“US moves against China could affect Aussie trade terms with China, potentially impacting the Aussie economy.”

Governor Bullock’s comments suggested the need for policy easing if there is a US-China trade war. A more dovish RBA rate path would weaken Aussie dollar demand.

For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.

Australian Dollar Daily Chart

Turning to the US session, softer US labor market data could narrow the US-Aussie interest rate differential. Rising bets on an H1 2025 Fed rate may drive the AUD/USD pair above the 50-day EMA, bringing the $0.63623 resistance level into play.

Conversely, tighter US labor market conditions may sink Fed rate cut bets, potentially pulling the pair toward $0.61500 and the upper band of the descending channel.

Additionally, US-China tariff developments remain a risk factor. The AUD/USD pair could break out if the US and China progress toward a trade agreement.

Market Trends: Central Banks Drive Sentiment

Broader market trends suggest that central banks remain key drivers of currency markets:

• The BoJ’s forward guidance will affect USD/JPY’s reaction to Japanese data.
• US labor market data will influence broader dollar trends.
• AUD/USD movements will depend on US-China tariff developments and RBA policy expectations.

Beyond central banks, global trade policies and China’s economic stimulus may impact market sentiment in the coming weeks.

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