Japanese Yen and Aussie Dollar News: Aussie Inflation and the BoJ in Focus

BoJ Rate Hike Bets Waver as Japan’s LEI Nears Key Pivot

On Wednesday, March 26, Japan’s Leading Economic Index (LEI) will influence the USD/JPY pair and the Bank of Japan’s policy stance. According to the preliminary report, the LEI edged up from 107.9 in December to 108.0 in January, marking a modest 0.1% increase.

An upward revision would signal optimism in the economic outlook, supporting a more hawkish BoJ rate path. The Index considers various economic indicators such as new job offers, machinery orders, and consumer confidence.

Conversely, a lower LEI print could further temper bets on a July BoJ rate hike, especially after the latest Jibun Bank Services PMI report.

• Bearish Yen case: A downward revision to the LEI could lower bets on a July BoJ rate hike, driving the USD/JPY toward the March 25 high of 150.942.
• Bullish Yen case: A higher LEI reading may raise expectations of a July BoJ rate hike. The USD/JPY could drop toward the March 20 low of 148.169 on a more hawkish BoJ policy stance.

BoJ Reveals Conditions for Further Rate Hikes

Bank of Japan Governor Kazuo Ueda dismissed concerns about recent Japanese Government Bond losses and clarified the BoJ’s conditions for future rate hikes:

“We have said that we will continue adjusting the degree of monetary easing if underlying inflation is likely to approach 2%. Our policy objectives are to achieve price stability, and the pursuit of our policies would not be disturbed by considerations for the BOJ’s finances.”

Japan’s core inflation rate eased to 3% in February, down from 3.2% in January. Despite the softer number, underlying inflation remained well above the 2% target, supported by rising food prices.

However, pay rises from this year’s Shunto (spring wage negotiations) have led some economists to downplay expectations of a more hawkish BoJ rate path.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero suggested wage growth may not be strong enough to fuel inflationary pressures:

“While the stronger Yen is alleviating cost push inflation, the economic outlook is deteriorating with increasing uncertainty on US policies. Furthermore, the expected incremental wage increase at the spring negotiation is unlikely to be regarded as additional evidence of strengthening virtuous circle between nominal wages and inflation yet.”

A Reuters poll conducted between March 4–11 showed economists favoring a July rate hike. 26 of 37 expected a hike in July, with the chances of a July move rising from 59% in February to 70% in March.

USD/JPY Trends: US Durable Goods Orders and Fed Policy in Focus

Later in the US session, US durable goods orders will give further insights into the demand environment. Economists expect orders to decline by 1% month-on-month (MoM) in February after rising 3.1% in January.

• A larger-than-expected fall would align with March’s S&P Global Manufacturing PMI, which dropped below the neutral 50 mark, signaling a sector contraction. In this scenario, the USD/JPY pair could fall toward the March 20 low of 148.169 on recession fears.
• An unexpected rise in orders could ease recession fear, potentially driving USD/JPY toward the March 25 high of $150.942.

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

Aussie Dollar: Will the Monthly CPI Indicator Boost RBA Rate Cut Bets?

Turning to AUD/USD, the Monthly CPI indicator will be pivotal for Aussie dollar demand. Economists expect the Aussie inflation rate to hold steady at 2.5% in February.

A softer inflation reading could fuel bets on a June RBA rate cut, possibly dragging the AUD/USD pair below $0.62500 and toward $0.62. Conversely, an unexpected rise in inflationary pressures may temper bets on an H1 2025 RBA rate cut. In this scenario, the AUD/USD could break out above the 50-day EMA, bringing the $0.63623 resistance level into play.

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

Australian Dollar Daily Outlook: US Manufacturing Sector in View

In the US session, US durable goods orders will influence the US-Aussie interest rate differential.

A sharp drop in durable goods orders could fuel recessionary fears, supporting multiple Fed rate cuts. A more dovish Fed rate path would narrow the rate differential in favor of the Aussie dollar. In this scenario, the AUD/USD pair could climb above the 50-day EMA to target the $0.63623 resistance level.

Conversely, another spike in orders may signal a resilient demand environment, lowering multiple Fed rate cut bets. A more hawkish Fed stance could widen the rate differential in favor of the US dollar, pushing AUD/USD back toward $0.62.

Meanwhile, beyond the data, President Trump’s tariff policies need consideration. Higher tariffs could weigh on global sentiment, creating headwinds for commodity currencies like the Aussie Dollar.

Key Market Trends: Central Bank Policies and Trade Developments

Current drivers for the forex market include:

• USD/JPY: BoJ insights after softer inflation and Services PMI data, and the spring wage negotiations.
• USD/JPY and AUD/USD: US tariff developments, FOMC member commentary, and US inflation readings.
• AUD/USD: Aussie inflation trends, China’s stimulus efforts, and US-China trade tensions.

Read our expert analysis on USD/JPY and AUD/USD forecasts here for deeper insights.