USDJPY driven by external factors, but also eye on wage data

Rising Fed hike expectations and a continued improvement in global risk assets are supporting USDJPY as it recovered the highest level since late August. The main drivers of USDJPY will likely remain the external factors, Japan's September Monthly Labour Market Survey (Monday) and September Machinery Orders (Thursday) will also be watched. 

Wage dynamics will be particularly important as Governor Kuroda at last week's post-BoJ press conference revealed his preference for a "balanced" inflation, where "not only inflation but also wages and corporate earnings increase." While the scheduled pay increased for the sixth consecutive months to August (+0.2%), the wage growth remains subdued. For September labour survey, wages per worker is expected to accelerate to +0.6% y/y (consensus: +0.5%) from +0.4% in August. 

Trend in real wages is another focus as it slowed to +0.1% y/y in August from +0.5% in July; while lower energy prices will likely push up real wage growth in September, it is believed that it could weaken again in October. September Machinery Orders will shed some light on capex dynamics, and a +6.7% m/m (consensus: +3.2%) rebound from -5.7% in August. Elsewhere, September Balance of Payments (Tuesday) and October PPI (Thursday) will also be released.