Insights 
VT 
The AUD/JPY pair remains stable for a second day, trading around 94.60 during European trading hours. The Japanese Yen’s difficulties stem from the Bank of Japan’s cautious stance on rate hikes, raising expectations of delayed changes.
A Board Member from BoJ indicated Japan is close to but has not fully reached the BoJ’s price target, needing to keep an accommodative policy. Another member advised against rushing rate increases, with BoJ Governor stating that future rate hikes depend on economic data.
Japanese Yen and US Tariff Issues
The Japanese Yen also faces pressure due to unresolved tariff issues with the US. President Trump suggested potential tariffs of 30-35% on Japan without extending the July 9 deadline on suspended tariffs.
AUD/JPY’s potential upside is limited by recent Australian economic data. Australia’s trade surplus shrank to 2,238M in May, below expectations, exports fell by 2.7% MoM, and imports rose by 3.8% MoM.
However, the S&P Global Australia Composite PMI rose to 51.6 in June. This represents a ninth month of growth and the fastest pace since March, with Services PMI also increasing to 51.8. The Australian Dollar showed the strongest performance against the Japanese Yen among major currencies.
What we’ve seen over the past couple of sessions is a relatively firm grip on direction for AUD/JPY, with prices parked near the 94.60 mark. That sort of stagnation often signals that traders are waiting for clearer cues — perhaps from upcoming central bank signals or shifts in trade policy developments. The market’s patience stems in large part from conflicting forces on both sides of the currency pair.
Japan’s central bank remains notably hesitant to tighten policy, which may sound familiar. One board member noted that while inflation is moving closer to the target, it’s still not enough to prompt any immediate shift. Another reinforced the message by cautioning against hasty moves. Governor Ueda reiterated the same idea: there’s no preset path, and future decisions will hinge entirely on incoming data. We take that to mean interest rates won’t move significantly in the very near term unless the data turn convincingly. Even then, we wouldn’t expect an abrupt change, given their track record.
US Tariff Impact and Australian Economic Signals
There’s more weight on the Yen as well, and it’s coming from overseas. The US has revived concerns around tariffs, and with the July deadline nearing, the lack of an extension adds pressure. Loose talk around imposing 30–35% tariffs naturally fuels further weakness in the Yen, as trade friction rarely helps a currency.
On the Australian side, the economic signals are mixed — which can often confuse rather than clarify. Trade figures disappointed, with the May surplus coming in well below expectations. Exports declining while imports rose is not the scenario that lifts a currency over the longer term. That’s particularly true for a country like Australia, so closely tied to exporting commodities and services to Asia.
Still, the recent strength in the PMIs tells us domestic momentum may be holding up better than the trade balance implies. Services and composite activity not only grew for a ninth working month, but picked up pace too, reaching levels we haven’t seen since March. That has likely softened the blow from trade data and lent support to the Australian Dollar.
For us, the implication is fairly direct. The Australian Dollar may not surge but it’s underpinned by local activity. Pair that with Yen softness and we still find demand for AUD/JPY on dips. However, limited headroom remains — at least until trade distortions are resolved or the BoJ signals something firmer than vague data-dependence.
Short-term volatility might stay subdued unless the US follows through with firm tariff decisions or if Australian inflation data takes a clear direction. For positioning, we’d be cautious placing high-leverage directional bets right now. Firepower might be better suited for range-trading setups, at least while both central banks hold their current approaches. The size of the moves may not match the macro chatter just yet, and we’re not seeing enough to justify a breakaway from existing ranges.
