Japanese Yen and Aussie Dollar Forecasts: Inflation, China, and Tariffs in Focus

Japan Inflation, Tariffs, and the BoJ in Focus

A tariff-fueled inflation debate puts central banks and currencies under the microscope as pressure builds on the BoJ. A stronger Yen? Rising tariffs are unsettling central banks and reshaping the FX landscape, with the BoJ caught in the middle.

Inflation data from Japan added to market focus on Friday, April 18, with USD/JPY and Bank of Japan under scrutiny. The annual inflation rate softened from 3.7% in February to 3.6% in March. Meanwhile, core inflation increased from 3.0% in February to 3.2% in March. The pickup in core inflation typically supports a more hawkish BoJ policy stance.

However, rising economic uncertainty over President Trump’s tariff policies could deter the Bank of Japan from hiking rates in the near term. Tariff-related volatility has roiled global markets and led to downward revisions in growth forecasts worldwide.

Recent reports suggest the BoJ will lower its 2025 growth projection at the next meeting. The scale of the revision may hinge on the outcome of ongoing US-Japan trade talks. A favorable deal could limit the economic fallout and strengthen the case for a BoJ rate hike.

BoJ officials have sought to manage expectations in recent sessions. On April 16, Governor Kazuo Ueda warned that the Bank may need to respond to any tariff-driven economic shocks. On April 17, BoJ board member Junko Nakagawa emphasized the importance of patience in assessing potential impacts on inflation and growth.

The Japanese Yen’s response to the inflation figures reflected market sentiment toward tariffs and BoJ policy. BoJ rhetoric and trade developments will be crucial for USD/JPY trends.

USD/JPY: Key Scenarios to Watch

Safe-haven flows into the Yen could weigh on USD/JPY, while improving risk sentiment may lift the pair.

• Bullish Yen Scenario: US-Japan trade developments, heightened risk aversion, or hawkish BoJ rhetoric could push USD/JPY toward the 140.309 support level.
• Bearish Yen Scenario: Stalled US-Japan trade talks, risk-on flows, or dovish BoJ guidance could push USD/JPY above 145.

USD/JPY Daily Outlook: Fed and Tariffs in Focus

Later in the US session, FOMC members’ commentary requires consideration after the market’s reaction to Powell’s recent warnings. Hawkish forward guidance supporting a pause in rate cuts could send the USD/JPY pair toward 145. Conversely, calls for multiple rate cuts to bolster the US economy may drag the pair toward the 140.309 support level.

Tariff developments also warrant close monitoring. Fresh US tariff threats and a lack of progress in trade negotiations may drive safe-haven demand, weighing on the USD/JPY. A softer US stance, however, could support risk sentiment and curb demand for the Yen.

Potential USD/JPY Moves

• Bullish US dollar Scenario: Softer US tariffs or hawkish Fed commentary could drive the USD/JPY pair toward 145.
• Bearish US dollar Scenario: Dovish Fed guidance or fresh tariff threats may send the pair toward the 140.309 support level.

Explore expert USD/JPY forecasts and setups in our latest analysis.

AUD/USD Outlook: Tariffs and the RBA Rate Path

For the Aussie dollar, tariff-related developments will influence AUD/USD trends and potentially the RBA rate path. Aussie labor market data released on April 17 showed an unemployment rise from 4.0% in February to 4.1% in March as the participation rate edged higher. The data offered little support for near-term rate cut expectations.

However, growth demand uncertainties could stall the AUD/USD’s resurgence. With a trade-to-GDP ratio above 50%, a tariff impact on global supply chains and trade terms may affect the Aussie economy. In this scenario, the RBA could cut rates earlier to bolster the economy, given that 20% of the workforce is in trade-related jobs.

A more dovish RBA rate stance could weigh on Aussie dollar demand, while a wait-and-see approach could drive the AUD/USD pair higher. Given China accounts for one-third of Aussie exports, US-China trade developments and Beijing’s stimulus plans are critical to AUD/USD trends.

AUD/USD: Market-Moving Factors

• Bullish Aussie dollar Scenario: Rising US-China trade tensions or hawkish RBA rhetoric may drive the AUD/USD pair above the 200-day Exponential Moving Average (EMA), targeting $0.65.
• Bearish Aussie dollar Scenario: Easing tariffs or dovish RBA signals could drag the pair below the $0.63623 support level, bringing the 50-day EMA into play.

For a comprehensive analysis of AUD/USD trends and trade data insights, See our top trading signals for AUD/USD amid tariff tensions here.

Aussie Dollar Daily Outlook: Fed Policy in Focus

In the US session, falling bets on an H1 2025 Fed rate cut could pressure AUD/USD, widening the US-Aussie rate differential in the US dollar’s favor. A more hawkish Fed stance may send the AUD/USD pair below $0.63.

However, rising expectations of multiple Fed rate cuts to bolster the US economy. could pressure the US dollar. In this scenario, the AUD/USD pair may move toward $0.65.

Key Market Drivers to Watch Today:

• USD/JPY: US-Japan trade talks and BoJ commentary.
• USD/JPY and AUD/USD: Fed guidance and tariff headlines.
• AUD/USD: RBA commentary, Beijing stimulus, and US-China trade headlines.

Review today’s trade setups in our latest USD/JPY and AUD/USD reports.