Japanese Yen and Aussie Dollar News: Tokyo CPI Supports Hike, but Tariffs Pose Risks

Tokyo Inflation Supports a July BoJ Rate Hike

On Friday, March 28, Tokyo inflation figures influenced USD/JPY price action and sentiment toward the Bank of Japan’s rate path. While headline inflation held steady, underlying inflation accelerated, signaling a potential July BoJ rate hike. Key figures included:

• Tokyo annual inflation rate: Unchanged at 2.9% in March
• Tokyo core inflation rate: 2.4% in March vs. 2.2% in February.
• Tokyo CPI Ex-Food and Energy: 1.1% in March vs. 0.8% in February.

Despite signs of stronger inflation, President Trump’s tariff policies have heightened economic uncertainty. US trade policies could leave the BoJ in a policy holding pattern until the effects of tariffs on demand become clearer.

The USD/JPY slipped from 151 to a session low of 150.762 before steadying, a modest response to firmer underlying inflation.

Bank of Japan Summary of Opinions Highlight Policy Risks

On March 28, the BoJ Summary of Opinions reflected policymakers’ concerns over global economic conditions amid escalating trade tensions. Notable remarks included:

• Uncertainties regarding the policies of the new US administration will have an impact on business and household sentiment around the world. Therefore, uncertainties regarding the global economy have heightened.
• Heightened uncertainties regarding the global economy triggered by US policy conduct can be pointed out as a change in risks to the outlook since the previous MPM.
• Downside risks stemming from the United States have rapidly heightened recently and, depending on how tariff-related issues develop, it is quite possible that these risks will even have a negative impact on Japan’s real economy. In that case, the Bank will need to be particularly cautious when considering the timing for raising the policy interest rate.

Following the Summary of Opinions release, USD/JPY bounced from the earlier Tokyo-triggered pullback as investors considered the broader risk outlook.

USD/JPY Trends: Eyes on US Personal Income and Outlays

Later in the US session, the crucial personal income and outlays report will likely impact the Fed’s interest rate outlook. Economists expect an uptick in the Core PCE Price Index and a rebound in personal spending.

Potential Price Scenarios:

• Higher-than-expected inflation and upward trends in personal income and spending would support a less dovish Fed rate path. In this scenario, the USD/JPY pair could target the 152 level, a key resistance level in February.
• Conversely, a softer inflation reading and weaker personal income may support bets on multiple Fed rate cuts, potentially dragging the pair toward the 149.358 support level.

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

Aussie Dollar Outlook: China’s Response Key to AUD/USD

Shifting to AUD/USD, price action hinges on China’s response to US tariffs and blacklistings, along with Beijing’s policy rollouts. China accounts for one-third of Aussie exports, influencing the Australian economy, the RBA rate path, and the Aussie dollar.

An escalation in the global trade war could pressure the Aussie dollar, given Australia’s trade-to-GDP ratio exceeds 50%. However, robust demand from China could alleviate the pressures of sweeping US tariffs, underscoring the potential effects of Beijing’s stimulus maneuvers on domestic consumption.

In February, RBA Governor Michele Bullock commented on global trade and tariffs, stating:

“Global trade uncertainties and tariff threats remain unpredictable, with economic impacts dependent on implementation and market reactions.”

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

Australian Dollar Daily Outlook: US Inflation in the Spotlight

In the US session, US inflation figures will impact the US-Aussie interest rate differential.

A higher-than-expected inflation reading could lower bets on a June Fed rate cut. A more hawkish Fed policy stance would widen the rate differential in favor of the US dollar. In this scenario, the AUD/USD pair could drop below $0.62500.

However, a softer inflation print may cement bets on a June Fed rate cut. A narrowing in the interest rate differential could drive the pair above the 50-day EMA toward the $0.63623 resistance level.

Personal income and spending data will also offer clues on inflation trends. Stronger personal income and consumption may fuel demand-driven inflation and support a hawkish Fed pivot.

Additionally, President Trump’s tariff policies need consideration. Higher tariffs could impact risk sentiment, weighing on 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 policy guidance and Tokyo inflation against the backdrop of new US tariffs.
• USD/JPY and AUD/USD: Impact of US personal income data, Fed commentary, and tariff developments.
• AUD/USD: China’s stimulus outlook and US-China trade tensions.

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