USD/JPY Under Pressure as Japan's Rengo Reports 5.26% Wage Hike

Japan's largest union group Rengo has announced an average wage hike of 5.26% for the current fiscal year, reinforcing expectations of continued Bank of Japan monetary policy normalization and placing downward pressure on USD/JPY. The figure closely mirrors last fiscal year's trajectory, where the preliminary 5.46% was ultimately confirmed at 5.25%, suggesting the final number may settle slightly lower following standard revision practices. Sustained wage growth above 5% is significant as it supports the BOJ's confidence that a virtuous cycle of wages and inflation is taking hold, potentially paving the way for further rate hikes. This contrasts with the Federal Reserve's current stance, where rate cut expectations have been building, creating a narrowing interest rate differential that favors yen strength. Traders should monitor USD/JPY for continued bearish momentum, with key support levels in focus. The wage data reinforces a hawkish BOJ outlook, and any upward surprises in final wage figures could accelerate yen appreciation. Near-term, cross-yen pairs such as EUR/JPY and GBP/JPY may also face selling pressure as the yen-positive narrative strengthens.