AUD/JPY falls below 90.50 due to rising odds of BoJ rate hikes

• AUD/JPY continues to weaken as the Japanese Yen strengthens amid growing expectations of BoJ rate hikes.

• BoJ’s Ueda signaled that further rate hikes remain on the table, provided that inflation trends align with the bank’s projections.

• The PBoC opted to keep its LPRs unchanged, holding the one- and five-year rates at 3.10% and 3.60%, respectively.

The AUD/JPY pair extends its decline for a second straight session, hovering around 90.40 during Monday’s European trading hours. The Japanese Yen (JPY) continues to strengthen, supported by rising expectations that the Bank of Japan (BoJ) will persist with its interest rate hikes.

BoJ Governor Kazuo Ueda recently stated that Japan’s real interest rates remain very low and indicated that the central bank may continue raising rates if economic and price conditions evolve as projected. His sentiment was echoed by BoJ board member Junko Nagakawa, reinforcing market expectations of further tightening.

Meanwhile, risk sentiment remains fragile amid ongoing concerns over US President Donald Trump’s fluctuating stance on tariffs. The latest move by the White House to impose tariffs on Chinese vessels docking at US ports has raised fears of disruptions to global shipping, boosting demand for traditional safe-haven assets like the Yen.

However, losses in the AUD/JPY cross may be limited as the Australian Dollar (AUD) finds support following the People’s Bank of China’s (PBoC) decision to maintain its Loan Prime Rates, holding the one-year rate at 3.10% and the five-year at 3.60%.

The Aussie Dollar also drew strength from market concerns over the broader economic impact of US tariffs. Additionally, sentiment improved after Trump announced exemptions for key technology products—many of which are manufactured in China, Australia’s largest trading partner and a major buyer of its commodity exports.