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Forex pairs in this Article » EUR/USD, USD/JPY (Bali) - Stable JGB yields and Abe pressure for higher wages supports rising USD/JPY trend, notes Greg Gibbs, FX Strategist at RBS.

Key Quotes

"Japanese PM Abe is reported to have again called for faster wages growth. He said it was crucial they rise to help "us escape deflation". And he said, "Some companies are already responding. For example, executives at Toyota and Hitachi have promised a raise." Abe has met with unions and business leaders several times over recent months in a bid to encourage wage growth."

"This news is probably an attempt by Abe to pressure companies to use the profitability gains from a weaker JPY to boost wages and build household confidence to spend and increase economy wide inflation expectations."

"Higher inflation expectations improve the effectiveness of the BoJ's monetary policy by reducing real yields tending to encourage more spending and investment and weaken the JPY further generating a virtuous cycle of a weaker JPY further raising inflation expectations. To the extent that the market feels that corporate Japan will respond to Abe's pressure, it is a negative development for JPY."
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