AUD/JPY drops to near 92.50 following Tokyo’s inflation, Aussie Retail Sales data
- AUD/JPY loses ground as the Japanese Yen appreciates following Tokyo’s stronger core inflation data.
- The JPY draws support from safe-haven demand after the US federal Court ruling allowing Trump's tariffs to take effect.
- Australian Retail Sales fell 0.1% MoM in April, against the expected 0.3% growth.
AUD/JPY extends its losses for the second successive day, trading around 92.50 during the Asian hours on Friday. The currency cross depreciates nearly 0.50% as the Japanese Yen (JPY) gains ground against its peers after Tokyo’s core inflation came in stronger than expected. The upbeat data reinforced expectations of the Bank of Japan’s (BoJ) 25 basis point rate hike in July.
On Friday, the headline Tokyo Consumer Price Index (CPI) rose 3.4% year-over-year in May, as compared to 3.5% in the previous month. Meanwhile, Tokyo Core CPI excluding Fresh Food came in at 3.6% YoY, following a 3.4% increase in April. The index has surpassed median market forecasts for a 3.5% gain.
The AUD/JPY cross loses ground as the safe-haven demand for the JPY strengthens after the US Court of Appeals for the Federal Circuit in Washington, on Thursday, temporarily allowed Trump's tariffs to take effect.
On Wednesday, a three-judge panel at the Court of International Trade in Manhattan condemned Trump’s usage of the Carter-era International Emergency Economic Powers Act (IEEPA) to justify his international agenda, quoting it as exploitation of the president’s authority. The federal court found that Trump exceeded his authority in imposing broad import tariffs and declared the executive orders issued on April 2 unlawful.
Moreover, the AUD/JPY cross depreciates as the Australian Dollar (AUD) struggles after the release of the seasonally adjusted Australian Retail Sales, which declined 0.1% month-over-month in April, against the expectations of remaining consistent at 0.3% growth. Meanwhile, the monthly Building Permits fell by 5.7%, against the expected increase of 3.1%.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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