Since the Bank of Japan exited negative interest rates, the USD/JPY has tumbled to the 154 handle. Forward guidance impacted buyer demand for the Japanese Yen, with the BoJ signaling the need for accommodative policy measures.

However, the weaker Japanese Yen impacts import prices and household spending. Household spending and the services sector are considerations for the Bank of Japan. Hopes of recent wage hikes translating into a demand-driven inflation environment could fade if the weakness in the Yen persists.

On Wednesday, trade data from Japan highlighted the effects of a weak Yen on demand. The trade balance grew from a ¥377.8 billion deficit to a ¥366.5 billion surplus in March. However, imports fell by 4.9% year-on-year in March after rising by 0.5% in February.

US Economic Calendar: Jobless Claims, the Philly Fed, and the Fed

On Thursday, the US labor market will be in focus. Economists forecast initial jobless claims to increase from 211k to 215k in the week ending April 13. An unexpected spike in jobless claims may influence the Fed rate path.

Recent economic indicators, including inflation, labor market data, and retail sales figures, have impacted investor expectations of a June Fed interest rate cut. Tight labor market conditions are bolstering wage growth, which in turn increases disposable income. This upward trend in disposable income could fuel consumer spending and demand-driven inflation.

In response to the latest round of economic indicators, investors shifted bets to a September Fed rate cut. However, a deterioration in labor market conditions could impact wage growth and refuel investor bets on a June rate cut.