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(Bloomberg) -- Japanese economic data is gaining importance among yen traders for the first time in almost a decade, as expectations grow of further interest-rate hikes by the central bank.

That marks a mindset change since the Bank of Japan ended its negative-rates policy last March. After the central bank started radical monetary easing in early 2016, traders had little doubt the stimulus would continue regardless of what economic indicators showed, making it mostly safe to ignore Japanese data.

Recent currency swings show that’s no longer the case. The dollar-yen exchange rate moved 0.11% in the five minutes after the latest wage data released on Feb. 5, the biggest reaction since 2017, according to Bloomberg-compiled data. A 0.18% change in the currency pair on Feb. 17 in the five minutes following gross domestic product data was the second biggest since 2016.

Although the moves are still modest, they indicate an attitude change among market participants, who have historically been used to dollar-yen being primarily driven by US bond yields and data from the world’s largest economy. The shift comes as the BOJ signals that more rate hikes are in the pipeline, while its counterpart in the US remains in a wait-and-see mode after a string of cuts last year.

“Japanese data usually don’t move markets, but recently they’ve had more impact,” said Shinichiro Kadota, the head of Japan FX and rates strategy at Barclays Securities Japan Ltd. “It’s probably because the BOJ’s a bigger driver now.”

The yen has exhibited an increasingly strong linkage with a gauge measuring deviations of economic data from forecasts. Correlation between the currency’s nominal effective exchange rate and Citigroup Inc.’s Economic Surprise Index stood at 0.30. Although this is still far lower than a 1.0 reading that would show perfect co-movement, it’s higher than other G-10 currencies.

The yen’s renewed sensitivity to local data may mean more room for appreciation, as recent strong figures have provided support for the BOJ to continue on its rate hike path. That increases the possibility of foreign investors and local margin traders trimming bearish yen wagers, accelerating the currency’s climb.

Asset managers are already the most bullish on the currency since 2021, while hedge funds are reducing their short yen bets, data from the Commodity Futures Trading Commission show. On the other hand, Japanese margin traders have boosted their bearish yen wagers by about 70% this month, according to data compiled by Bloomberg. A potential unwinding of these positions, which were built on demand for higher-interest-income currencies, may speed up the yen’s gains.

Japanese nominal wages rose at the fastest pace in nearly three decades according to data out this month, and GDP figures showed Japan’s economy outperformed forecasts. This week’s Tokyo consumer price index reading is expected to keep the BOJ on track for future hikes, with option skews showing that the market sees more yen gains in the month ahead.

READ: Yen Volatility Nears Six-Week High as Tokyo Inflation Gauge Eyed

“The mood in the market is that traders are looking for material to bring the yen higher against the dollar,” said Tsutomu Soma, a bond and currency trader at Monex Inc. in Tokyo.

Overnight index swaps suggest though that traders expect only one more hike for certain this year. That would keep the rate gap between the US and Japan still wide and weigh on the Japanese currency. A stronger yen may also give the BOJ more flexibility on timing its rate hike.

JPMorgan Chase & Co. strategists estimate that surprises in wage-related data have affected the yen the most in the past two years, as Japan’s central bank emphasizes that they’re paying attention to wage growth momentum and its impact on price-setting behavior by firms. Although the currency is yet to fully factor in rate hikes and the impact of inflationary pressures, the strategists expect this to change.

“Given that the yen currently doesn’t factor in much of the rising expectations for rate hikes in Japan, if the yen’s sensitivity to Japanese inflation data increases in the future, the yen’s appreciation when inflation exceeds expectations could be relatively large,” wrote JPMorgan strategists Ikue Saito and Junya Tanase in a note.

Rabobank expects the yen to outperform its G-10 peers this year as investors monitor the strength of Japan’s economy, and predicts further gains against the dollar and euro.

“While Governor Ueda has been talking about the deflationary period in the past tense for the past few months, investors appear to be only now letting go of some of their skepticism on this front,” said Jane Foley, head of G-10 FX strategy at the Dutch bank. “This would explain the focus on economic data releases, which have tended to be mostly better than expected recently.”