Japan eyes on political rhetoric

USDJPY finally broke above the recent range (118-122) and rallied through the high since 2007 (124.14). Broad USD strength following upside surprises from US economic data, as well as relatively light positioning in the yen, have likely contributed to the sharp move. This week, while USD should continue to be the main driver of the USDJPY given heavy US data schedule, political rhetoric from Japanese officials on the yen will also be eyed. Last week, we saw conflicting comments on the recent moves: for example, Finance Minister Aso said that "yen moves in the recent days were rough, we will continue to monitor the markets carefully", while Economy Minister Amari said that yen has not reached excessively weak levels.  

In terms of economic data, the April Monthly Labor Survey (Tuesday) to show that wage per worker accelerated to +0.4% y/y (consensus: +0.4%) from 0.0% in March, according to Barclays. However, further improvement will likely require a recovery in production. In March, overtime work hours fell steeply with a particularly sharp decline observed in manufacturing, which was consistent with fall in industrial production. 

"If production begins to turn around, y/y wage per worker growth is expected to gradually recover as well. Elsewhere, Q1 Corporate Survey (Monday) is likely to show that capital expenditure including software accelerated 3.0% y/y (consensus: -0.2%) from +2.8% in Q4 last year", expects Barclays.