Japanese Yen and Aussie Dollar Forecasts: Tokyo Core-Core Inflation Slides; US Data Next

Markets Brace for Crucial Friday as Tokyo Inflation Sinks BoJ Rate Hike Bets

Traders face a pivotal session after Tokyo inflation cooled to 2.5% in September, dampening speculation the Bank of Japan could act as soon as October. The plunge in the “core-core” rate from 3% to 2.5%—falling toward BoJ’s 2% target—shifted focus squarely onto the BoJ’s policy outlook, sending USD/JPY higher and raising the stakes ahead of US inflation data later today.

While the national inflation figures are key for the BoJ, economists consider Tokyo inflation a leading indicator of Japan’s inflation outlook. Economist expected the core-core inflation rate to jump to 3.3%.

The USD/JPY pair rose from 149.879 to 149.956 after the inflation report amid expectations of a near-term BoJ hold on monetary policy.

Later in the morning session, Bank of Japan policymaker Asahi Noguchi is on the calendar to speak. Asahi Noguchi was one of seven board members who voted to keep interest rates at 0.5% on Friday, September 19. A more hawkish stance on monetary policy could support bets on an October policy adjustment, given that two board members dissented from the policy decision.

US Personal Income and Outlays Report in Focus

Later Friday, the highly anticipated Personal Income and Outlays report could influence expectations of an October Fed rate cut. Economists forecast the Core PCE Price Index to rise 2.9% year-on-year in August, matching the previous month’s increase.

A higher-than-expected reading could dampen rate cut expectations, sending USD/JPY toward the the August 1 high of 150.917.

Conversely, a softer inflation print could fuel speculation about Fed rate cuts in October and December, pushing the pair toward the 149.358 support level. If breached, the 200-day EMA would be the next key technical support level.

Beyond the data, traders should consider commentary from FOMC members.

USD/JPY Scenarios: Hawkish BoJ vs. Dovish Fed Risks

• Bearish USD/JPY Scenario: Hawkish BoJ cues, softer US inflation, or dovish Fed rhetoric could drag USD/JPY toward 147.5.
• Bullish USD/JPY Scenario: Dovish BoJ signals, hotter US inflation, or hawkish Fed cues could send the pair toward 150.917.

Read the full USD/JPY forecast, including chart setups and trade ideas.

As traders weigh a potential BoJ and Fed divergence, attention is also turning to Australia, where inflation and labor data cloud the RBA’s next move.

Aussie Inflation and the RBA in Focus

Turning focus to the AUD/USD pair, recent labor market and inflation data have clouded the RBA’s policy outlook.

Job vacancies fell 2.7% in the three months to August 2025 as private sector job vacancies declined 3.4%. Furthermore, the number of unemployed persons per job vacancy rose from 1.9 to 2.0, the highest level since February 2021.

The numbers were in line with the recent labor market report. Employment fell 5.4k month-on-month in August, and the participation rate dropped from 67% to 66.8%.

While labor market data is signaling a cooling, inflation could potentially be moving in the opposite direction. The Monthly CPI Indicator showed the annual inflation rate rose from 2.8% in July to 3% in August, the top end of the RBA’s 2-3% target range.

While rising inflation has reduced immediate market confidence in a November RBA rate cut, economists such as Dr. Shane Oliver still expect cuts due to broader economic headwinds. Dr. Shane Oliver recently commented on the potential influence of the Fed, stating:

“And if the Fed continues to cut because of a weakening US jobs market, it may also add to pressure for more rate cuts here, as weaker US growth will impact global and Australian growth. Our base case remains for 0.25% RBA rate cuts in November, February, and May.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Dovish RBA rhetoric may drag AUD/USD toward $0.65.
• Bullish AUD/USD Scenario: Hawkish RBA cues could send AUD/USD toward $0.66.

See our full AUD/USD analysis for detailed trends and trade setups.

US Inflation and Rate Differentials

Money markets continue to price in a November RBA rate cut, with further policy adjustments possible in February and May. However, August’s US inflation data could significantly influence the Fed rate path and US-Aussie interest rate differentials.

Softer-than-expected US inflation would raise bets on multiple Fed rate cuts in the fourth quarter. A more dovish Fed rate path may narrow the rate differential, favoring the Aussie dollar. Under this scenario, the AUD/USD pair could move toward $0.66, bringing the $0.665 level into sight.

Conversely, hotter inflation could widen the rate differential, potentially pushing AUD/USD toward $0.65.

With inflation in the spotlight, traders should also closely monitor Fed speakers for insights into the timing of further policy easing.

Key Market Drivers to Watch Today:

• USD/JPY: Watch BoJ commentary.
• USD/JPY and AUD/USD: Monitor US data and FOMC members’ speeches.
• AUD/USD: Monitor for RBA commentary.

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