First Week of April 2026 - Yen Fluctuates and the "Shunto" Effect.

1. A Promising Start to the New Wage Season

April marks the beginning of the financial and academic year in Japan. The year 2026 is drawing particular attention as agreements from the spring wage negotiations (Shunto) begin to take effect on a broad scale.

Historic Pay Rises for Office Workers

According to a preliminary report from the Japan Business Federation (Keidanren) released on the morning of April 3rd, the average wage increase at major companies has reached 5.1%, the highest level in over three decades.

• Technology sector: Average increase of 6.2%
• Automotive manufacturing sector: Average increase of 5.5%
• Retail services sector: Average increase of 4.0%

Expert analysis: The increase in base pay not only helps workers cope with core inflation (currently at 2.8%), but also represents a strategic move by corporations to retain talent amid fierce competition from foreign-invested companies.

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2. Currency Markets: The Yen Regains Its Recovery Momentum

One of the biggest focal points in the first week of April has been the fluctuation of the Japanese Yen (JPY) exchange rate. After a period of heavy pressure in the first quarter, the Yen has shown signs of a reversal.

The BOJ and "Soft Intervention" Moves

On April 2nd, 2026, the JPY/USD exchange rate returned to the 142 Yen per 1 USD mark, a significant recovery from the February low of 148. This recovery is primarily attributed to two factors:

1. Policy interest rate: The Bank of Japan (BOJ) continues to signal a second short-term interest rate hike this summer, reinforcing the path out of the era of negative interest rates.
2. Weakening of the US Dollar: The DXY (Dollar Index) fell slightly following the release of disappointing US employment data by the Federal Reserve.

JPY/USD Exchange Rate Fluctuations for the Week (April 1 – April 4, 2026)

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3. Tourism Boom Driven by the "Cherry Blossom Economy"

One cannot overlook the brightest spot in Japan's economy at this time: the tourism and service sector.

The Boost from International Visitors

The first week of April is the peak blooming period for cherry blossoms (Sakura) in the Kanto and Kansai regions. This event, combined with relaxed E-Visa policies, has created an explosive wave of international tourists.

Tourism Sector Indicators (Week 1 – April 2026)

A Policy Perspective

The double-edged sword of tourism growth

While the tourism industry generates enormous foreign currency revenue, the Japanese government is grappling with the issue of over-tourism in Kyoto and the Mount Fuji area.

Measures Being Implemented

• Introduction of local accommodation taxes
• Limiting the number of visitors at popular hotspots
• Enhancing time-based visitor flow management

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4. Analytical Summary

The first week of April 2026 reveals:

An Economy Undergoing "Transfusion"

Japan is shifting from:

• A deflationary economy ー＞ NO
• An economy of mild inflation + wage growth ー＞ YES

This is a positive signal, reflecting that economic policy is on the right track.

Challenges Ahead

However, risks remain present in the coming weeks:

External Pressures

• Rising imported energy prices
• Surging imported food prices
• Global geopolitical instability

Potential Consequences

• Decline in domestic purchasing power
• Strain on household spending
• Risk of slowing economic recovery momentum

Strategic Conclusion

Japan's core challenge in the coming period:

• Maintaining a balance between growth and price stability
• Protecting consumer purchasing power
• Controlling external shocks from global markets

Overall: Japan is at a critical turning point – significant opportunities come with considerable pressures.