Australian Dollar weakens against Japanese Yen following China’s Services PMI data

AUD/JPY extends its losses for the fourth consecutive day, trading around 113.50 during the Asian hours on Thursday. The Australian Dollar (AUD) remains subdued following a wave of mixed economic data from Australia and China, putting downward pressure on the currency cross.

Australia’s Trade Balance narrowed significantly to A$1,923M month-over-month in July, down from a revised A$2,341M surplus in the previous reading, though it still beat market consensus expectations of A$1,390M. The contraction was largely driven by a 3.3% drop in Australian exports, reversing a 9.1% surge from the prior month, alongside a 2.5% decline in imports. Meanwhile, China’s RatingDog Services Purchasing Managers’ Index (PMI) offered a bright spot, climbing to 51.4 in August from July's 50.4 and comfortably outperforming the forecasted 50.6.

In Japan, economic activity showed strong momentum as the Jibun Bank Services PMI expanded to 52.5 in August, up from July’s 51.2 and slightly higher than the flash reading of 52.3. This represented the strongest growth pace since March, propelled by a faster rebound in new orders after they hit a 25-month low in July. Broader business activity also trended upward, with the Jibun Bank Composite PMI reaching 53.5 in August 2026, up from both the 53.4 flash estimate and July's 52.7 figure. This marked the highest overall reading since February and extended the private sector’s expansion streak to 17 consecutive months.

Japan’s reflation push seen limiting scope for lasting Yen strength

Strategists at BNY Mellon remain unconvinced that official efforts will translate into a materially stronger currency, stating that they are “deeply skeptical of the Japanese authorities’ ability to boost JPY.” They point to comments from U.S. Treasury Secretary Scott Bessent, who remarked on Tuesday that “Abenomics was reflationary, Japan can sit back and enjoy.” For BNY, that observation underscores how, in “low-growth, low-yield economies, a reflation period can make currency performance far more tolerable,” reinforcing the view that Japan’s current reflation-focused policy mix may ease pressure on the Yen rather than deliver a sustained appreciation.