Japanese Yen and Aussie Dollar Forecasts: Tariffs, Powell, and US Nonfarms in Focus

Household Spending Rebounds: Will BoJ Pull the Trigger in May?

Japan’s February household spending figures shifted market focus back to the USD/JPY and Bank of Japan. A 3.5% rebound raised questions about inflation and the timing of the next BoJ rate hike. However, President Trump’s tariff announcement on April 2 added uncertainty to the global outlook.

Household spending soared by 3.5% month-on-month in February, rebounding from a 4.5% slump in January. The pickup in spending may fuel demand-driven inflation, potentially supporting an H1 2025 BoJ rate hike.

However, the USD/JPY pair showed limited reaction. Trump’s sweeping tariffs have increased economic uncertainty, prompting concerns about their potential impact on domestic demand and the broader Japanese economy.

Bank of Japan Governor Kazuo Ueda spoke before Trump’s April 2 tariff announcements, stating:

“The impact of US tariff policy on the global economy is highly uncertain. But, depending on the range and scale of US tariffs, they could have a big impact on each country’s trade activity.”

While rising uncertainty may delay a BoJ rate hike, one former policymaker believes the May policy meeting remains live. On April 2, recently departed BoJ board member Seiji Adachi reportedly stated:

“I would probably vote for a rate hike at the May gathering if proposed. The door is open for the next rate hike. Japan’s inflation trend is rising. If it’s rising that is naturally a priority over uncertainties.”

USD/JPY Trends to Watch:

• Bullish Yen scenario: Retaliatory moves against US tariffs, risk-off sentiment, or hawkish BoJ rhetoric could pull the USD/JPY pair toward the 140.309 support level.
• Bearish Yen Scenario: Progress in tariff negotiations, improving market sentiment, or dovish BoJ signals may push the USD/JPY pair toward the 149.358 resistance level.

US Jobs Report, Fed Chair Powell, and USD/JPY Outlook

Later in the US session, Fed Chair Powell and the US Jobs Report will impact USD/JPY trends. Strong wage growth, falling unemployment, and robust nonfarm payrolls could sink Fed rate cut bets, boosting US dollar demand. A more hawkish Fed stance may drive the USD/JPY toward the 149.358 resistance level.

Conversely, rising unemployment, softer wage growth, and disappointing payrolls could raise expectations of multiple Fed rate cuts. Under this scenario, the USD/JPY pair may fall toward the 140.309 support level.

While the US Jobs Report will be crucial, Fed Chair Powell will likely draw significant interest in light of Trump’s tariffs. Insights into the potential impact of tariffs on inflation or monetary policy will influence US dollar demand.

Signals for a June Fed rate cut could support a USD/JPY fall toward the 140.309 support level. However, a more hawkish stance could drive the pair back toward the 149.358 resistance level.

Explore expert forecasts and trade setups for USD/JPY in our latest market analysis here.

Aussie Dollar Outlook: Tariff Developments and China in Focus

Turning to AUD/USD, investors should monitor tariff developments and potential policy responses from China. The AUD/USD pair may face downside risk if China and other major trade partners, such as Japan, retaliate and Trump threatens more punitive tariffs.

China accounts for one-third of Aussie exports, while Japan contributes around 15%. With Australia’s trade-to-GDP ratio above 50%, weakening demand from China and Japan could impact the Aussie economy. In this scenario, the RBA could shift focus from inflation to external demand, potentially opening the door to a May rate cut. However, if China and Japan strike swift trade agreements and Trump walks back tariffs, the RBA may stay focused on inflation.

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, commented on Trump’s tariffs:

“Trump’s Retro Day tariffs likely take US average tariffs above 1930s levels. This means an increased threat to US and global growth, particularly if there is retaliation (which is likely as many of the tariffs will be hard to negotiate away).”

For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.

Australian Dollar Daily Outlook: US Jobs Report and Fed Chair Powell

During the US session, a strong US Jobs Report and a hawkish Fed Chair Powell could lower bets on multiple Fed rate cuts. This would likely widen the US-Aussie interest rate differential in favor of the US dollar, potentially pulling the AUD/USD pair toward the 50-day EMA and $0.63.

Conversely, a cooling labor market and a dovish Fed Chair would narrow the rate differential, supporting an AUD/USD move toward the $0.63623 resistance level.

Key Market Trends

The main drivers of the forex market include:

• USD/JPY: BoJ forward guidance amid speculation over a May BoJ rate hike.
• USD/JPY and AUD/USD: US Jobs Report, Fed Chair Powell’s commentary, and tariff developments.
• AUD/USD: Beijing’s stimulus measures and trade developments between the US, China, and Japan.

Do not miss today’s trade setups in our full USD/JPY and AUD/USD reports.