AUD/JPY attracts some sellers to near 94.50 as Japan's business mood improves
- AUD/JPY softens to near 94.50 in Tuesday’s only Asian session.
- Japan's Tankan Large Manufacturing Index rose to 13.0 in Q2, better than estimated.
- Chinese June Caixin Manufacturing PMI data will be in the spotlight later on Tuesday.
The AUD/JPY cross attracts some sellers to around 94.50 during the early Asian session on Tuesday. The Japanese Yen (JPY) edges higher against the Aussie after the upbeat Japanese Tankan survey. Traders brace for Australia’s Retail Sales data for May, which will be released later on Wednesday.
Business sentiment among Japan's big manufacturers unexpectedly improved in the second quarter (Q2) of 2025. The encouraging report provides some support to the JPY and acts as a headwind for the cross. The Tankan Large Manufacturing Index rose to 13.0 in Q2 from 12.0 in Q1. This reading came in above the market consensus of 10.0. Meanwhile, the large Manufacturing Outlook arrived at 12.0 in Q2 versus 12.0 prior, stronger than the 9.0 expected.
Many analysts expect the impact of US tariffs on exports and output to intensify later this year and complicate the BoJ's decision on when to resume interest rate hikes. This, in turn, might cap the upside for the JPY. A slight majority of economists in a Reuters poll anticipate the Japanese central bank's next 25 basis points (bps) hike to come in early 2026.
Traders await the Chinese Caixin Manufacturing PMI data for June for fresh impetus. If the data shows a stronger-than-expected outcome, this could lift the China-proxy Aussie as China is a major trading partner for Australia.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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