The AUD/JPY pair climbed toward 94.50 during Asian trading hours on Tuesday, marking a fourth consecutive day of gains. The cross strengthened as the Japanese yen lagged behind other major currencies, with investors cautious about the likelihood of further Bank of Japan (BoJ) rate hikes this year.
On Monday, Japan’s Prime Minister Shigeru Ishiba warned that rising BoJ interest rates could constrain government borrowing by raising funding costs, potentially limiting Tokyo’s fiscal spending plans. His remarks come amid mounting concerns over Japan’s economic outlook, particularly due to the impact of US President Donald Trump’s tariff policies.
Despite these concerns, BoJ Governor Kazuo Ueda signaled openness to monetary tightening, telling Parliament, “we will raise interest rates if we have enough confidence that underlying inflation nears 2% or moves around 2%.” Reuters reports that the BoJ’s preferred gauge of underlying inflation, which focuses on demand-driven price pressures, remains below the 2% target—even as headline consumer inflation has stayed above 2% for at least three years.
Meanwhile, the Australian dollar outperformed peers, buoyed by optimism surrounding ongoing US-China trade talks in London, now entering their second day. White House economic adviser Kevin Hassett expressed confidence that “export controls will be eased and rare earths released in volume” following the meetings.
As Australia’s economy is closely linked to China as its largest trading partner, hopes for an improved Chinese economic outlook have bolstered the Aussie’s gains against the yen.
