The AUD/JPY pair has stayed steady for two days, trading at around 94.60 in European trading hours. The Japanese Yen is struggling because the Bank of Japan (BoJ) is being cautious about raising interest rates, which suggests that changes might be delayed. A BoJ board member mentioned that Japan is getting closer to the BoJ’s price target, but it’s not quite there yet. Therefore, it’s important to maintain a supportive policy. Another board member advised against rushing into rate increases, while BoJ Governor Ueda stated that future rate hikes will depend on economic data.

Japanese Yen and US Tariff Issues

The Yen is also under pressure due to ongoing tariff issues with the US. President Trump has hinted at possible tariffs of 30-35% on Japan, without extending the July 9 deadline on currently suspended tariffs. The recent Australian economic data limits any upward movement for AUD/JPY. Australia’s trade surplus fell to 2,238 million in May, which was below expectations. Exports decreased by 2.7% month-over-month, while imports increased by 3.8% month-over-month. On a positive note, the S&P Global Australia Composite PMI rose to 51.6 in June. This marks the ninth month of growth and the fastest pace since March, with the Services PMI also increasing to 51.8. The Australian Dollar has performed the best against the Japanese Yen among major currencies. In the past couple of sessions, AUD/JPY has shown a steady direction, with prices hovering near 94.60. This kind of stability often indicates that traders are waiting for clearer signals, like insights from central banks or changes in trade policy. The market’s patience is influenced by conflicting factors on both sides of the currency pair. Japan’s central bank remains hesitant to tighten policy. A board member mentioned that while inflation is getting closer to the target, it’s still not enough to justify any immediate changes. Another member echoed this by warning against quick actions. Governor Ueda reinforced this idea: there’s no set plan, and future decisions will depend solely on new data. We interpret this to mean that interest rates won’t see significant changes soon unless the data strongly indicates it. Even then, we don’t expect a sudden shift based on their previous behavior.

US Tariff Impact and Australian Economic Signals

The Yen is facing extra pressure from outside Japan. There are renewed worries about US tariffs, and as the July deadline approaches without an extension, this adds to the pressure. The talk of imposing 30-35% tariffs generally weakens the Yen, as trade tensions typically hinder a currency’s strength. In Australia, the economic signals are mixed, which can confuse the overall picture. Trade data was disappointing, with the May surplus significantly below expectations. A drop in exports and a rise in imports are not favorable for a currency’s long-term strength, especially for a country like Australia that relies heavily on exporting goods and services to Asia. However, the recent strength in the PMIs suggests domestic momentum might be stronger than the trade balance indicates. Both services and composite activity have grown for the ninth consecutive month and at an accelerating pace, reaching levels not seen since March. This likely softened the impact of the disappointing trade data and provided support for the Australian Dollar. In our view, the situation is quite clear. The Australian Dollar may not rise sharply, but it has support from local activity. Coupling that with a weaker Yen, we still see demand for AUD/JPY during dips. However, upside potential remains limited—at least until the trade issues are resolved or the BoJ provides stronger signals beyond vague data dependence. Short-term volatility is likely to stay low unless the US makes firm tariff decisions or if Australian inflation data moves in a clear direction. For trading, we recommend being cautious about making high-leverage directional bets right now. A more suitable strategy might be range trading, at least while both central banks maintain their current approaches. The moves might not align with the larger market discussions just yet, and there isn’t enough to warrant a breakout from existing trading ranges. Create your live VT Markets account and start trading now.

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