The AUD/JPY exchange rate is currently around 108.55 in early European trading. The Japanese Yen is losing strength against the Australian Dollar because the Bank of Japan has decided to hold its interest rates steady. The Bank of Japan has kept the rate at 0.75%, which is the highest it’s been in 30 years. A proposal from board member Hajime Takata to raise rates again did not receive support, even though the bank seems to be leaning towards tighter policies.

Economic Growth Potential

The outlook from the Bank of Japan is positive, with projections for economic growth in 2025 and 2026. Their stance reflects an expectation of a moderate economic recovery. According to technical analysis, AUD/JPY remains above its 100-day EMA at 102.07, indicating strong bullish momentum. However, the Relative Strength Index (RSI) is at 77.21, suggesting that the pair may be overbought. Any pullbacks may aim for the Bollinger middle band at 105.85, with further support at 103.62. The expanding Bollinger bands indicate rising volatility and the potential for trend acceleration. Since 2013, the Bank of Japan has changed its monetary policy approach by moving away from ultra-loose policies. This decision was driven by the weaker Yen and rising inflation above their 2% target.

Yen’s Weakness and AUD’s Strength

The AUD/JPY exchange rate is climbing around 108.55 after the Bank of Japan announced it would keep interest rates at 0.75%. This decision was anticipated and confirms the Yen’s weakness as the BoJ seems less aggressive than other central banks. This ongoing policy divergence continues to influence the pair. While the trend appears bullish, caution is warranted since the daily chart indicates overbought conditions. The RSI is above 77, a level that often signals a price correction or a consolidation phase. Buying at these high levels poses significant risks of a pullback to the 105.85 support level. The Australian dollar is benefiting from strong commodity prices. Recent data from January 2026 shows iron ore prices stable above $140 per tonne. Coupled with the Reserve Bank of Australia’s hawkish tone throughout late 2025, this provides a solid backing for the AUD’s strength. In contrast, the BoJ’s careful approach is evident. Japan’s latest inflation report from December 2025, showing core CPI at 2.1%, has allowed the BoJ to pause its rate hikes. After three rate increases in 2025, this pause indicates the central bank is waiting for more information before considering further tightening. This uncertainty is currently putting pressure on the Yen. In the upcoming weeks, it would be wise to consider derivative strategies that safeguard against a short-term pullback. Options like buying calls with a higher strike price or using call spreads could allow for continued upside while managing costs and risks. However, selling uncovered puts is risky given the market’s current overextended state. Create your live VT Markets account and start trading now.

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