Households remain gloomy, yen to strengthen again

Japan’s labour market is as strong as most of today’s workers will ever have known, which makes the persistent weakness of consumption all the more puzzling. Spending remains flat according to data from the Bank of Japan today and survey evidence suggests that confidence has actually been falling as wage growth has picked up. That’s a problem for policymakers who have been hoping for signs of a shift of mind-set among Japan’s consumers.  Meanwhile, rising US yields have contributed to a weakening of the yen this week. While this decline probably has a little further to run, we expect Japan’s currency to rebound next year.