Japan’s wage trend crucial for BOJ policy outlook

USD/JPY has been moving strongly between the range of 118-120, on unexpected Bank of Japan's QQE program on 18 December meeting. The pair has been weighed down in the final sessions of year end by weaker risk sentiment and lack of upward momentum in the U.S. Dollar.

USD/JPY is been seen driven by global factors in the first week of 2016. The pair might recover from recent low range, if the U.S. dollar finds support from strong U.S. economic data, including December U.S. Nonfarm Payrolls and ISM (scheduled on Friday and Monday respectively). Risk-off moves potentially caused by a further decline in commodity prices or negative news from EM, may intensify the flight-to quality bid for the yen.

Japan's Labour Cash Earning for the month of November (YoY) is scheduled on this Friday with the previous value 0.7 percent.

"Wage dynamics will remain a key factor for the BoJ policy outlook, given the emphasis placed by Governor Kuroda on the upcoming shunto (annual spring wage negotiation)," noted Barclays in its research note on Tuesday.