Japanese Yen and Aussie Dollar Forecasts: USD/JPY Eyes 155 on Fed, BoJ Policy Shifts

Producer Prices Signal Cooling Price Pressures

Japanese producer prices fueled speculation about an October Bank of Japan rate hike, influencing USD/JPY.

Producer prices increased 0.3% month-on-month in September, after falling 0.2% in August. The upswing in producer prices could raise bets on a BoJ October rate hike, given policymakers’ concerns about US tariffs.

September’s data indicated that Japanese firms raised prices after the US lowered tariffs in August. Higher sales prices may widen margins, easing cost pressures. Higher margins could lift wages or increase staffing levels. Notably, average cash earnings fell sharply in August, dropping from 3.4% year-on-year in July to 1.5%.

A potential rebound in wages and tighter labor market conditions could boost household spending and bolster the Japanese economy. Private consumption accounts for around 55% of Japan’s GDP. The BoJ could hike rates if wage growth picks up and the economy gathers momentum.

BoJ Governor Kazuo Ueda recently highlighted concerns about tariffs affecting margins and wage growth, stating:

“If uncertainty regarding overseas economies and trade policies remains high, firms may place stronger emphasis on cost-cutting and may weaken their efforts to reflect price increases in wages.”

Today’s data came amid rising uncertainty about the BoJ’s rate path, fueled by Takaichi’s victory in the Liberal Democratic Party election. Her support for ultra-loose monetary policy and fiscal support has tempered BoJ rate hike bets, driving USD/JPY from 147.46 (October 3) to 153.233 (October 9).

Economists Highlight BoJ Policy Uncertainty

Alicia Garcia, Asia Chief Economist at Natixis, commented on Japanese Government Bond (JGB) yield spikes and the softer yen, stating:

“Takaichi’s commitment to fiscal expansion and her reluctance for further rate cuts could lead to problematic outcomes. You can already see that there’s going to be an additional increase in Japanese government bond yields, because people know there will be more supply and a weaker yen. I think that’s what’s going to happen: a bigger fiscal deficit and the delay in the BOJ hike to December.”

Garcia Herrero also warned against expecting a December rate hike, stating:

“There is a risk that the BOJ decides not to hike again, but because her policies are so expansionary and inflationary, there might be a hike in December.”

With traders pricing out an October monetary policy adjustment, incoming economic data will be crucial for the yen and USD/JPY trends.

Fed Speakers, Consumer Sentiment, and USD/JPY Outlook

Across the Pacific, market focus will turn to consumer sentiment and the Fed’s policy stance. Economists forecast the Michigan Consumer Sentiment Index to fall from 55.1 in September to 54.2 in October.

A lower reading would likely raise expectations of October and December Fed rate cuts, potentially pushing USD/JPY toward 150. Weaker sentiment may cool consumer spending, dampening inflation.

On the other hand, a pickup in sentiment may signal robust consumer spending, sending USD/JPY toward 155.

Beyond the data, traders should closely monitor FOMC member speeches for clues on the size and timing of rate cuts.

USD/JPY Scenarios: BoJ Uncertainty, US data, and Dovish Fed Bets

• Bearish USD/JPY Scenario: hawkish BoJ rhetoric, softer US data, or dovish Fed signals could drag USD/JPY toward 150.
• Bullish USD/JPY Scenario: dovish BoJ comments, stronger US data, or hawkish Fed rhetoric could send USD/JPY toward 155.

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

As traders shift expectations of an October rate hike, Aussie economic data continues to weigh on RBA rate cut bets.

Business Turnover and the Aussie Dollar in the Spotlight

Turning focus to the AUD/USD pair, Aussie business turnover numbers could fuel speculation about a November RBA rate cut.

Falling business turnover could signal pressures on profit margins. Margin pressures may force firms to lower fixed costs, including workforce reductions. A looser labor market may curb wage growth and consumer spending, thereby softening demand-driven inflation. A more dovish RBA policy stance would weigh on the appetite for the Aussie dollar.

On the other hand, uptrends in business turnover would support hiring and rising wages, easing bets on an RBA rate cut. A less dovish RBA policy stance would likely lift demand for the Aussie dollar.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Softer Aussie data, dovish RBA signals, and rising trade tensions may push AUD/USD toward $0.65 and the 200-day EMA.
• Bullish AUD/USD Scenario: Stronger Aussie data, hawkish RBA rhetoric, and easing trade tensions could send AUD/USD above the 50-day EMA. A sustained move through the 50-day EMA could bring $0.66 into play.

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

US Data, Fed Speakers, and Interest Rate Differentials

While Aussie economic data continues to drive uncertainty about an RBA rate cut, US data and Fed speakers will also drive AUD/USD trends.

Weaker US consumer sentiment would support a more dovish Fed rate path. Rising bets on multiple Fed rate cuts would narrow the interest rate differential, favoring the Aussie dollar. A narrow rate differential may send AUD/USD above the 50-day EMA to target $0.66.

Conversely, a pickup in sentiment and hawkish Fed rhetoric would widen the rate differential, favoring the US dollar. A wider rate differential may push AUD/USD toward $0.65 and the 20-day EMA.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ comments and political headlines.
• USD/JPY and AUD/USD: Fed comments, US data, and Senate votes.
• AUD/USD: RBA speeches, Aussie data, and trade developments.

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