USD/JPY Under Pressure as Japan Wage Hikes Top 5% for Third Year

USD/JPY faces renewed downside pressure as Japan's largest union group Rengo confirmed that annual wage negotiations resulted in a 5.01% average pay increase, marking the third consecutive year above the 5% threshold. While the final figure was revised down from the preliminary estimate of 5.26%, the sustained strength of wage growth reinforces the Bank of Japan's rationale for continued monetary policy normalization and potential further rate hikes. Persistent wage inflation above 5% supports the BoJ's view that a virtuous wage-price cycle is firmly in place, increasing the likelihood of tightening actions that would narrow the interest rate differential between Japan and other major economies. For USD/JPY traders, the confirmation of robust wage growth strengthens the fundamental case for yen appreciation. Cross-pairs including EUR/JPY and GBP/JPY may also see JPY-supportive flows. Traders should monitor upcoming BoJ communications for signals on the pace of rate adjustments, as sustained wage momentum could accelerate the timeline for the next policy move.