Japanese Yen and Aussie Dollar Forecasts: Tokyo Inflation Hits BoJ 2% Target

Tokyo Inflation Surges, Putting BoJ and USD/JPY in Focus

On Friday, April 25, Tokyo’s inflation figures raised pressure on the Bank of Japan to consider hiking rates, weighing on the USD/JPY pair. Core inflation accelerated from 2.4% in March to 3.4% in April, while the CPI Ex Food and Energy soared to 2% year-on-year in April, up from 1.1% in March.

The CPI Ex Food and Energy hit the BoJ’s 2% inflation target, potentially boosting bets on an H1 2025 policy move. However, a US-Japan trade agreement and a de-escalation in the US-China trade war would be crucial for the BoJ. Economic fallout from US trade policy may overshadow inflation figures, potentially leaving the BoJ in a holding pattern until Q4 2025.

A recent Reuters poll, conducted from April 14 to 21, illustrated this uncertainty:

• 47 of 56 economists predict the BoJ will maintain interest rates at 0.5% in the April 30-May 1 and June 16-17 policy meetings.
• 27 of 52 (52%) predict a 25 basis-point rate hike in Q3 2025, down from 70% in the March poll.
• Only 11 of 39 economists forecast a July rate hike, while 9 predict a 2026 or later policy tightening, up from zero in March.
• 31 economists stated that tariff policy has impacted Japanese business sentiment.

USD/JPY: Key Scenarios to Watch

Safe-haven flows into the Yen could continue to weigh on USD/JPY, particularly if US-China trade tensions intensify. In contrast, a breakthrough in trade talks or dovish BoJ commentary could reverse this dynamic.

• Bullish Yen Scenario: Escalation in the US-China trade war or hawkish BoJ signals may drag USD/JPY lower toward the 140.309 support.
• Bearish Yen Scenario: De-escalation in the US-China trade war or dovish BoJ rhetoric could lift the pair toward 145.

USD/JPY Daily Outlook: PMIs and the Fed in Focus

Later in the US session, the University of Michigan Consumers Survey will influence US dollar demand. According to the preliminary survey, the Consumer Sentiment Index fell from 57 in March to 50.8 in April, while the Inflation Expectations Index soared to 6.7%, up from 5% in March.

A lower inflation expectations reading could impact US dollar demand, potentially pushing USD/JPY toward the 140.309 support level. Conversely, a higher Inflation Expectations reading may drive the USD/JPY pair toward 145.

Beyond the finalized survey, Fed forward guidance and trade headlines will also influence USD/JPY trends.

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

AUD/USD Forecast: Trade Headwinds and Central Bank Signals

For the AUD/USD pair, trade developments will influence Aussie dollar demand on April 25. Given Australia has a trade-to-GDP ratio above 50% and China accounts for one-third of Aussie exports, easing trade tensions is crucial for the Australian economy. The AUD/USD pair rallied 0.78% on April 24 amid reports of the US and China resuming trade negotiations.

However, China has dismissed a meeting with the US on trade, refueling market uncertainty. CN Wire reported:

“China’s foreign ministry: China and US have not held consultations and negotiations on tariffs. China commerce ministry: If US really wants to resolve the issue, it should lift all unilateral tariff measures against China.”

A lack of progress could heighten expectations for a May RBA rate cut, although a weaker US dollar, driven by trade uncertainty, may help ease downside pressure on AUD/USD. A more dovish RBA path paired with escalating US-China trade tensions could drag the pair toward support at $0.63623 while easing trade risks or a hawkish RBA tone could fuel a rally toward $0.64500.

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: Consumer Sentiment in Focus

In the US session, softer consumer sentiment but higher inflation expectations could temper Fed rate cut bets. A more hawkish Fed stance would widen the US-Aussie interest rate differential, sending AUD/USD toward the $0.63623 support level.

Conversely, a lower inflation expectations print could boost bets on a Fed rate cut, potentially driving AUD/USD toward $0.64500.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy expectations and US-Japan trade developments.
• USD/JPY and AUD/USD: US consumer sentiment, inflation expectations, and Fed speakers.
• AUD/USD: US-China trade headlines, RBA commentary, and Chinese stimulus measures. Stimulus measures from Beijing, targeting domestic demand, may mitigate tariff risks.

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