Is Japan's inflationary efforts failing?

BoJ Governor Haruhiko Kuroda had used the allegedly positive wage development as an indicator of his extremely optimistic inflation forecast. Even in the past that had been a very courageous interpretation of the wage data.

Today's data on wage developments in July has now finally put paid to this interpretation. The data from the Ministry for Health, Labour and Welfare illustrates that the summer-2015 round of bonuses was disappointing. The summer bonuses fell by 5% year-on-year. The effect of the higher December bonuses (+2% year-on-year) was therefore more than counterbalanced, says Commerzbank. All in all Japanese employees earned less over the past 12 months than in the 12 months before. 

The gorvernor has a choice to capitulate and allow Japan to remain stuck in a permanent state of zero inflation (which would be JPY positive) or implement further measures (perhaps even helicopter money - which would be clearly JPY negative), says Commerzbank. The fact that the yen has been appreciating this morning could be interpreted as meaning that the market is considering the likelihood of "capitulation" to be more likely. 

"The market should not be too certain about that. So far the BoJ has done everything it has been advised to do to ensure re-inflation - only late and not under full steam", added Commerzbank.