AUD/JPY hovers around 102.00, remains near fresh yearly highs following Reuters poll

AUD/JPY hit a yearly high of 102.10 as traders anticipate PM Takaichi’s stimulus package above JPY 20 trillion.
A new Reuters poll shows most economists expect the BoJ to lift rates to 0.75% at the December meeting.
RBA Assistant Governor Sarah Hunter said that “sustained above-trend growth could fuel inflationary pressures.”

Akhtar Faruqui FXStreet

AUD/JPY continues to gain ground for the third successive session, reaching the yearly high of 102.10 during the Asian hours on Thursday. The currency cross rises as the Japanese Yen (JPY) weakens, with traders expecting Japan’s Prime Minister Sanae Takaichi to unveil a stimulus package exceeding JPY 20 trillion. This has fuelled speculation that authorities may intervene again if the Yen depreciates further.

Traders grew cautious amid concerns about Japan’s fiscal health, intensifying a broader “Sell Japan” sentiment. The shift followed proposals from members of the ruling Liberal Democratic Party (LDP) for a supplementary budget exceeding JPY 25 trillion to support the plan, well above last year’s JPY 13.9 trillion extra budget.

A new Reuters poll indicates the Bank of Japan (BoJ) appears poised to raise interest rates at its December 18–19 meeting, with a slim majority of economists expecting the policy rate to rise to 0.75% from 0.50%. Although forecasts remain closely balanced, 53% of respondents anticipate a December hike, and all economists who offered a longer-term view expect rates to reach at least 0.75% by the end of Q1 2026.

BoJ board member Junko Koeda said in a speech Thursday that supply–demand indicators show the output gap near 0% and that labour markets remain tight amid a growing labour shortage. Koeda stated that “in this situation, I believe the bank must continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with improvement in economic activity and prices.” She emphasized that ongoing economic and price trends warrant further policy adjustment.

The AUD/JPY cross also draws support as the Australian Dollar (AUD) holds ground amid rising expectations for a cautious stance from the Reserve Bank of Australia (RBA). RBA Assistant Governor Sarah Hunter said on Thursday that “sustained above-trend growth could fuel inflationary pressures.” Hunter noted that monthly inflation data can be volatile and that the Bank won’t react to a single month of figures. She added that the RBA is closely assessing labour-market conditions to gauge supply capacity and is examining how the effects of monetary policy may be changing over time.

The People’s Bank of China (PBoC) decided on Thursday to leave its Loan Prime Rates (LPRs) unchanged in November. The one-year and five-year LPRs were at 3.00% and 3.50%, respectively. As China and Australia are close trading partners, China’s policy rates can affect the AUD.

Bank of Japan FAQs

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

What has been the Bank of Japan’s policy?

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

How do Bank of Japan’s decisions influence the Japanese Yen?

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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