The AUD/JPY currency pair declined to around 114.50 during early Asian trading hours on Wednesday, following the release of Australia's latest inflation data [1]. The Australian Bureau of Statistics reported that the country's Consumer Price Index (CPI) inflation rose to 4.6% year-over-year in March, up from 3.7% in February. This increase was largely attributed to a fuel shock stemming from the Middle East conflict. However, the figure was slightly below market expectations of 4.7% [1]. On a monthly basis, CPI rose by 1.1% in March, compared to a flat reading in the previous month [1].
The Australian Dollar weakened against the Japanese Yen in response to the softer-than-expected inflation data, as traders adjusted their positions. Despite this, expectations for another interest rate hike by the Reserve Bank of Australia (RBA) in May remain supported by a tight labor market and stronger-than-expected growth projected for late 2025, which could help limit further losses for the AUD [1].
On the Japanese side, the Bank of Japan (BoJ) concluded its two-day monetary policy meeting on Tuesday, deciding to keep the short-term interest rate steady at 0.75%, in line with market expectations [1]. The BoJ's policy statement indicated that the central bank will continue to adjust interest rates based on economic, price, and financial market developments. The statement also noted that wages and prices may experience upward pressure beyond what the output gap suggests, and that the BoJ will closely monitor the economic and price impact of ongoing Middle East conflicts when determining the timing and pace of future policy adjustments [1].
Market participants are now awaiting Japan's Tokyo Consumer Price Index (CPI) data, which is scheduled for release later on Friday [1].
CONCLUSION
The AUD/JPY pair weakened after Australian inflation data came in below expectations, though the prospect of an RBA rate hike in May may provide some support. The BoJ maintained its current policy stance, signaling a cautious approach to future adjustments. Market attention now turns to upcoming Japanese inflation data for further direction.