Japanese Yen and Aussie Dollar Forecasts: Japan Inflation Cools, USD/JPY Eyes 150

Inflation Cools: Will the BoJ Keep Rate Hike Hopes Alive?

Crucial national inflation figures from Japan fueled speculation about the timing of a Bank of Japan rate hike, influencing USD/JPY trends. Headline inflation eased, though underlying price pressures remain elevated.

The annual inflation rate softened from 3.3% in June to 3.1% in July, while the so-called core-core inflation rate held steady at 3.4%. Despite headline inflation easing, underlying prices remained well above the BoJ’s 2% target, supporting a further move toward monetary policy normalization.

Ahead of the July inflation data, Japan’s terms of trade deteriorated in July, clouding the outlook for the BoJ’s interest rate path. Notably, exports fell 2.6% year-on-year in July (June: -0.5%) as US tariffs weighed on external demand. After a significant contribution to GDP growth in the second quarter, weaker exports and elevated inflation complicate the BoJ’s monetary policy decisions.

However, wage growth may boost private consumption and fuel demand-driven inflation, potentially boosting rate hike expectations. This divergence underscores the BoJ’s dilemma: weaker external demand versus stronger domestic wage pressures.

East Asia Econ noted on wage growth, stating:

“Japan’s central government has recommended the min wage rise by JPY63 this year, which would be a record rise. But it is up to the provinces to make the final decision, and most of them are going for increases that are even bigger.”

When do economists expect the BoJ to raise interest rates?

According to the latest Reuters poll, conducted between August 12 and 19:

• 67 of 73 economists (97%) forecast no change to interest rates in September.
• However, 45 of 71 (63%) expect a 25 basis point rate hike to 0.75% in the fourth quarter, up from 54% polled in July.
• 38% predicted an October rate hike, with 30% forecasting a January move. Only 18% expected a December hike.

Today’s inflation figures could bolster predictions of further policy tightening early in the fourth quarter.

USD/JPY Daily Outlook: Fed Chair Powell Takes Center Stage

Later in the session on Friday, Fed Chair Powell’s highly anticipated speech at the Jackson Hole Symposium could move USD/JPY. The FOMC Meeting Minutes revealed that members were concerned about tariffs, inflation, and the labor market. Powell could highlight where the Fed is more focused.

Greater attention to inflation may temper bets on multiple Fed rate cuts. A less dovish Fed rate path could drive USD/JPY toward the 149.638 resistance level. If breached, the bulls may target the August 1 high of 150.917.

Conversely, concerns about the labor market may signal a more dovish Fed policy stance, pushing the pair below the 200-day Exponential Moving Average (EMA) toward the 50-day EMA. If breached, 145 would be the next key support level.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Hawkish BoJ guidance or dovish Fed rhetoric. These factors could drag USD/JPY below the 200-day EMA, exposing the 50-day EMA.
• Bullish USD/JPY Scenario: Dovish BoJ signals or hawkish Fed guidance. These factors may drive the pair toward the 149.358 resistance level.

See today’s full USD/JPY forecast with chart setups and trade ideas.

AUD/USD: Wage Growth, Consumer Sentiment, and RBA Rate Cut Bets

Turning to the AUD/USD pair, expectations of an additional RBA rate cut in November have weighed on Aussie dollar demand. However, recent economic indicators sent mixed signals. Total wages and salaries paid by employers increased 1.5% month-on-month in June, up from an increase of 0.9% in March. Year-on-year, wages and salaries rose 5.9% (March: +5.8%).

Higher wages and lower interest rates may fuel spending and inflation, complicating Q4 rate cut bets. Private sector PMIs also signaled an improving macroeconomic backdrop, potentially delaying further policy easing.

The S&P Global Australia Composite PMI rose from 53.8 in June to 54.9 in July as private sector output expanded at the sharpest pace since April 2022. New export business expanded across the private sector, leading to higher staffing levels. Notably, wage costs contributed to higher inflation. However, the rates of cost inflation softened across the manufacturing and services sectors.

Why do new export order trends matter?

Australia has a trade-GDP ratio of over 50%, with roughly 20% of its workforce in trade-related jobs.

AMP Head of Investment Strategy and Chief Economist Shane Oliver projected a November rate cut and further policy easing in H1 2026, stating:

“We continue to see the RBA cutting rates again in November, February and May taking the cash rate down to 2.85%.”

However, not all economists share this view, with some cautioning that rising wages could delay further easing.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Dovish RBA guidance and cooling inflation. These factors could push AUD/USD below the $0.64 support level, potentially exposing the $0.63623 support level.
• Bullish AUD/USD Scenario: Hawkish RBA signals and sticky inflation. These factors could drive AUD/USD toward the 200-day EMA, bringing the 50-day EMA into sight.

Explore our full AUD/USD analysis, including key trends and trade data, here.

AUD/USD Daily Outlook: Will Fed Chair Powell Trigger an AUD/USD Decline?

While economists are betting on a November RBA rate cut, uncertainty lingers about the Fed’s policy outlook. Fed Chair Powell’s support for a September Fed rate cut and further policy easing would narrow the US-Aussie interest rate differential. A narrower rate differential could send AUD/USD toward $0.6450, bringing the 200-day EMA into view.

On the other hand, the pair could drop below $0.64, exposing the $0.63623 support level if Powell raises concerns about upside risks to inflation.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy signals.
• USD/JPY and AUD/USD: Fed Chair Powell.
• AUD/USD: RBA chatter.

For more in-depth analysis, review today’s USD/JPY and AUD/USD trading setups in our latest reports and consult the economic calendar.