Japanese Yen and Australian Dollar News: BoJ and RBA Minutes in Focus

BoJ Meeting Minutes Highlight Caution on Rate Hikes

The Bank of Japan’s October monetary policy meeting minutes put the USD/JPY in focus on Tuesday, December 24. The BoJ maintained its 0.25% interest rate in October and December.

Key insights included a cautious economic outlook:

• Overseas economies were projected to keep growing moderately, though uncertainties loomed regarding past central bank rate hikes, China’s economy, and geopolitical tensions.
• Japan’s economy showed moderate recovery despite some weakness, with growth expected to outpace its potential growth rate.
• Consumer sentiment had bottomed out, supported by rising wages.
• Inflation data suggested a gradual upward trend, underpinned by rising wages and improving economic conditions.
• Private consumption increased moderately despite price rises and other factors.
• Underlying inflation was expected to increase gradually, with the virtuous cycle between wages and prices continuing to intensify.
• If economic activity and prices developed as expected, the Bank could raise the policy interest rate gradually so that the rate would be 1.0% in the second half of fiscal year 2025 at the earliest.

Following October’s monetary policy decision, wage growth, private consumption, price trends, and the economic outlook had fueled expectations for a December rate hike.

However, BoJ Governor Kazuo Ueda signaled a more dovish stance in December, indicating the need for more wage growth data. The BoJ also wanted to assess the effects of Trump’s policies, dampening bets on a Q1 2025 rate hike.

With the USD/JPY trading above the 157 level, concerns about the effects of Yen weakness on import prices, living costs, and private consumption may resurface. However, markets may need the BoJ to disclose its priorities vis-à-vis wage growth, US policies, and the Yen to shift sentiment toward the BoJ rate path. This exposes the USD/JPY pair to BoJ rhetoric as 2024 draws to a close.

Expert Views on the Bank of Japan Rate Path

Robin Brooks, Senior Fellow at the Brookings Institution, remarked on US policies and the BoJ rate path, stating,

“Japanese interest rates keep drifting higher, as the BoJ seeks to normalize policy. This is a dangerous game. If the US puts large additional tariffs on China, that’s a big negative shock that will also hit Japan. Better for the BoJ to stay on hold instead of sneaky tightening…”

Brooks highlighted the need for patience to assess the potential effects of US tariffs on global demand.

USD/JPY Trends: Fed Chatter in Focus

Turning to the US session, investors should monitor FOMC member commentary before the holidays.

Support for a more hawkish Fed rate path could drive the USD/JPY toward 160 and the intervention zone. The Fed’s rate path outlook could widen the interest rate differential between the US and Japan if the BoJ remains hesitant about lifting rates. A break above 160 would bring the 161.920 resistance level into sight.

Conversely, dovish comments could drag the USD/JPY below the 156.884 support level. This would then enable the bears to target the 50-day EMA.

AUD/USD: RBA Meeting Minutes Impact Trends

Shifting our focus to the AUD/USD pair, the RBA’s monetary policy meeting minutes were also a focal point. In December, the RBA maintained its 4.35% cash rate but fueled rate cut optimism. The RBA’s minutes also reflected a similar stance on inflation and policy outlook.

Key points from the minutes included:

• Output growth had been weak in the 12 months to September at 0.8%.
• Economic activity picked up in November but less than expected.
• Household income and consumption had recovered but less than expected.
• Future consumption spending trends would significantly affect the economic outlook and the labor market.
• Labor market conditions had eased only gradually, with wage growth slowing.
• Inflation for rents and new dwelling costs had been slightly weaker than expected.
• Underlying inflation was around 3.5%, still well above the 2.5% midpoint of the inflation target.
• Despite softer-than-expected housing services inflation, inflation was unlikely to return sustainably to the midpoint of the target until 2026.
• Labor market, inflation, expenditure, and a revised set of staff forecasts would dictate the February policy decision.
• If the future flow of data continued to evolve in line with, or weaker than, their expectations, it would further increase their confidence that inflation was declining sustainably toward target.
• They (Board members) agreed that they had gained confidence about inflation moving sustainably toward target but risks remained.

The minutes mirrored comments from the RBA press conference that sent the AUD/USD crashing through the $0.64 mark.

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

Australian Dollar Daily Chart

In Tuesday’s US session, hawkish FOMC member chatter could weigh more heavily on the AUD/USD pair. A more hawkish Fed and dovish RBA could widen the interest rate differential between the US and Australia, potentially dragging the pair below $0.62. A drop below $0.62 would bring the lower trend line into play.

However, dovish comments supporting a January Fed rate cut may drive the AUD/USD toward $0.63. A return to $0.63 could enable the bulls to target the $0.63623 resistance level.

Global Market Trends: Key Takeaways for Traders

Monetary policy developments across the BoJ, Fed, and RBA highlight the importance of closely monitoring economic data and central bank rhetoric. For more detailed insights, explore our reports on USD/JPY and AUD/USD trends here.