FOREX NEWS & BLOG

Japan’s largest business lobby, Keidanren, and trade unions began their annual labor negotiations today, Wednesday.

• Expectations are for another round of significant wage increases.
• Japanese policymakers are particularly focused on whether these pay hikes will extend to smaller businesses.

Major companies have already committed to substantial salary increases, strengthening the case for the Bank of Japan (BOJ) to raise interest rates later this week.

Japan’s Centre for Economic Research found in a survey that

• large firms are expected to offer an average 4.74% wage hike —a slight decrease from last year’s 5.33%, but still a solid gain

Japan’s largest union, Rengo, is pushing for at least 5% wage hikes in 2025

• and a 6% target for smaller firms to help reduce the income disparity with larger corporations

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The Bank of Japan meet on January 23 and 245 and improving wage prospects are helping to boost expectation that Bank will hike its rate.

Bank of Japan Governor Ueda

This article was written by Eamonn Sheridan at www.forexlive.com.

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New Zealand’s consumer price inflation came in slightly above expectations in the fourth quarter of 2024, rising 0.5% quarter-on-quarter and holding steady at 2.2% annually. 

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Rengo is Japan’s largest union.

The head of the organisation says he agrees with the Bank of Japan that is wage hike momentum in Japan’s regions.

This article was written by Eamonn Sheridan at www.forexlive.com.

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China’s Lunar New Year, marking the start of the Year of the Snake, falls on Wednesday, January 29.

The official public holiday spans 8 days, from January 28 (New Year’s Eve) to February 4.

During this period, many businesses and government offices close, allowing people to travel home for family reunions. Celebrations traditionally continue for 16 days, culminating with the Lantern Festival on February 12.

With this long holiday comes a large demand for cash (more on this below if you want it).

The People’s Bank of China is in preparation mode, injecting funds today for 14 days rather than the usual 7 days:

• The People’s Bank of China injects 1157bn yuan via 14-day reverse repos in open market operations
• 959bn yuan mature today

The People’s Bank of China (PBOC) injects a large amount of funds into the financial system before the Lunar New Year mainly to address seasonal liquidity demands. Here’s why:

1. Increased Cash Demand

• The Lunar New Year is the biggest holiday in China, and people withdraw large amounts of cash for travel, gifts, and traditional red envelope (红包, hóngbāo) giving.
• This leads to a significant outflow of cash from banks, reducing liquidity in the financial system.

2. Corporate Demand for Funds

• Many companies pay year-end bonuses to employees before the holiday, increasing cash demand.
• Businesses also need extra funds to settle accounts, repay loans, and make advance payments before the long break.

3. Bank Liquidity Tightening

• The increased cash withdrawals and corporate payments tighten liquidity in the banking sector.
• Banks require more short-term funds to maintain stable operations and lending activities.

4. Preventing Volatility in Financial Markets

• If liquidity dries up too much, interbank lending rates (e.g., SHIBOR) can spike, affecting the stability of financial markets.
• The PBOC’s fund injections help stabilize interest rates and ensure smooth market functioning.

5. Supporting Economic Growth & Confidence

• The Lunar New Year is a major period of consumer spending and economic activity.
• Providing ample liquidity ensures banks can continue lending to businesses and individuals, supporting overall economic momentum.

This article was written by Eamonn Sheridan at www.forexlive.com.

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The Canadian dollar showed resilience following December’s inflation report, with elevated core measures and higher oil prices helping support comdoll demand.

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Japanese Prime Minister Shigeru Ishiba will emphasize strong wage growth surpassing inflation as a key element of his economic revival strategy in an upcoming policy speech to parliament, according to government sources.

Ishiba plans to challenge Japan’s historically low wage growth expectations and encourage businesses to continue the pay raise momentum seen last year. His speech, scheduled for Friday’s opening of the 150-day Diet session, will also highlight efforts to decentralize the economy and unlock regional potential.

Since taking office in October, Ishiba has made regional revitalization a priority ahead of this summer’s House of Councillors election. In parliament, he will seek bipartisan cooperation, as his Liberal Democratic Party (LDP) and Komeito coalition lack a majority in the House of Representatives, making opposition support crucial for passing legislation.

Despite record wage increases last year, rising prices continue to strain household budgets. To address this, Ishiba will commit to efforts to raise the national minimum wage to 1,500 yen ($10) per hour by the end of this decade, up from the current level of just over 1,000 yen.

This article was written by Eamonn Sheridan at www.forexlive.com.

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