Japanese Yen and Aussie Dollar Forecasts: Wages, Trade Wars, and the BoJ

Wage Growth to Impact Bank of Japan Rate Hike Bets

Japan’s wage growth data on Monday, April 7, will place the spotlight on the USD/JPY and Bank of Japan. Economists forecast average cash earnings to increase 3.1% year-on-year in February after rising 2.8% in January.

Stronger wage growth could boost consumer spending and demand-driven inflation. A higher inflation outlook may raise expectations of an H1 2025 BoJ rate hike.

Conversely, weaker wage growth may signal softer consumer spending and inflationary pressures. Under this scenario, markets could temper bets on a May or June BoJ policy move.

Wage growth remains a key consideration for the BoJ. However, the BoJ also needs wage growth to translate into consumption to drive inflation. US tariffs and heightened trade tensions may impact Japan’s labor market, consumer sentiment, and spending. Trade developments could be crucial for Japan’s economic outlook, suggesting the BoJ might keep interest rates steady in May.

Ahead of the tariffs, BoJ Governor Kazuo Ueda noted:

“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.”

USD/JPY Trends to Watch:

• Bullish Yen Scenario: Escalation in global trade war, risk-off sentiment, or hawkish BoJ rhetoric may pull the USD/JPY pair toward the 140.309 support level.
• Bearish Yen Scenario: Easing trade tensions, improving risk sentiment, or dovish BoJ signals could drive the USD/JPY pair toward the 149.358 resistance level.

USD/JPY Daily Outlook: Fed Commentary in Focus

Later in the US session, FOMC members’ commentary will influence USD/JPY trends. Increasing support to delay Fed rate cuts until H2 2025 could boost US dollar demand, potentially driving the USD/JPY pair toward the 149.358 resistance level. Conversely, calls for multiple Fed rate cuts to bolster the US economy could weigh on the US dollar and drag the pair closer to 140.

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

Shifting focus to the Australian Dollar, labor market indicators and trade tensions take center stage.

AUD/USD Outlook: Jobs, Tariffs, and China

Turning to AUD/USD, the Aussie labor market will be in focus. Economists expect ANZ-Indeed Job Ads to rise 0.9% month-on-month in March after sliding 1.4% in February.

A rebound in job ads could indicate a tightening labor market and rising wages. Higher wages may fuel inflation, supporting a less dovish RBA rate path. Conversely, a further decline in job ads may impact wages and spending, dampening inflation. A softer inflation outlook would support a more dovish RBA rate path.

While labor market conditions are crucial for the RBA, trade tensions and weakening demand from China and Japan, Australia’s two largest export markets, could overshadow the data.

Trump’s tariffs have intensified global trade uncertainty, fueling speculation about multiple RBA rate cuts and impacting Aussie dollar demand. Given Australia’s trade-to-GDP ratio exceeds 50%, the Aussie dollar remains sensitive to shifts in global trade dynamics.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on China’s retaliation to Trump’s tariffs:

“China has retaliated to US tariffs faster and stronger than any other country. Beijing’s latest round of tariffs suggested it was trying to position itself first in line for high-level negotiations with Washington.”

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

Australian Dollar Daily Outlook: The Fed in Focus

During the US session, Fed rhetoric will influence AUD/USD. Hawkish commentary, favoring a delay to rate cuts, could widen the US-Aussie interest rate differential, favoring the US dollar. A wider rate differential may pull the AUD/USD pair toward the April 4 low of $0.59862.

Conversely, Fed support for multiple rate cuts would narrow the rate differential, supporting a rebound toward the 50-day EMA and the $0.63623 resistance level.

Key Market Trends

The main drivers of the forex market include:

• USD/JPY: BoJ forward guidance and wage growth impact.
• USD/JPY and AUD/USD: US CPI data, Fed commentary, global trade developments.
• AUD/USD: Beijing’s stimulus measures and trade negotiations between the US and China, and the US and Japan.

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