AUD/JPY rebounds to near 93.50 amid stronger commodity prices, uncertainty over BoJ policy

AUD/JPY recoups recent losses from the prior session, trading around 93.30 during Asian hours on Friday. The Australian Dollar (AUD) finds support from rising commodity prices, including Gold, Steel, and Iron Ore, bolstering its strength against the Japanese Yen (JPY).

However, global trade tensions weigh on the AUD/JPY cross following US President Donald Trump’s decision to maintain a 25% tariff on Australian aluminum and steel exports, valued at nearly $1 billion. This move adds pressure to Australia’s trade outlook and key exports. Despite this, Australian Prime Minister Anthony Albanese confirmed that Australia will not impose retaliatory tariffs on the US, stating that such measures would increase costs for consumers and drive inflation higher.

Meanwhile, the Japanese Yen remains under pressure amid a cautious stance from the Bank of Japan (BoJ). The central bank is expected to keep interest rates unchanged next week while assessing the risks posed by escalating US trade tensions on Japan’s export-driven economy. The timing of the BoJ’s next rate hike remains uncertain, with policymakers monitoring global uncertainties.

“Japan’s economy and price developments appear stable, but external risks are growing,” a source familiar with BoJ discussions told Reuters. “Heightened global uncertainty could impact the BoJ’s rate hike plans,” echoed two additional sources.

Despite the recent pullback, the JPY remains near its strongest levels against its peers in months, supported by expectations of further BoJ rate hikes this year. Additionally, Japanese firms have agreed to substantial wage increases for the third consecutive year to help workers cope with inflation and address labor shortages. Higher wages are expected to boost consumer spending, fuel inflation, and provide the BoJ with greater flexibility for future rate hikes.