Japanese Yen & Australian Dollar Outlook: Bank of Japan Stays Cautious as Inflation Eases, Traders Eye Tamura’s Speech

Aussie Dollar in Focus Ahead of May CPI; Softer Data Could Stoke RBA Rate Cut Speculation

Powell’s Testimony in Spotlight: Key Driver for USD/JPY and AUD/USD Amid Dovish Sentiment

USD/JPY Outlook: Caution from BoJ and Powell’s Comments Take Center Stage

The Japanese Yen held steady in early Wednesday trading after the Bank of Japan’s (BoJ) latest Summary of Opinions indicated a cautious policy stance. Board members highlighted ongoing downside risks to inflation and raised concerns about global trade policy shifts—signs that the central bank may keep interest rates unchanged at 0.5% for now.

Key takeaways from the BoJ summary:

Global trade developments could weigh on economic growth.

The impact of tariffs may not yet be fully evident in economic data.

Core inflation remains subdued with persistent downside risks.

Steady wage gains are slightly boosting inflation expectations.

USD/JPY edge up by 0.05% to 144.96. Traders now turn their attention to a scheduled speech by BoJ Board Member Naoki Tamura, which could offer more insight into the central bank’s near-term outlook—especially amid unresolved global trade tensions and geopolitical uncertainty.

USD/JPY – Key Levels to Watch:

Bearish Scenario: Rising geopolitical risks, dovish Fed tone, or a hawkish shift from the BoJ could drag USD/JPY toward 142.50.

Bullish Scenario: Hawkish signals from the Fed or continued caution from the BoJ may lift the pair toward resistance near 148.02.

AUD/USD Forecast: Inflation Data and Fed Tone Set the Stage

The Australian Dollar remains in focus as markets await May’s Consumer Price Index (CPI), expected at 2.3%, slightly down from April’s 2.4%. Softer impact may print could reinforce market expectations. For rate cuts by the Reserve Bank of Australia (RBA).

Economist Shane Oliver commented:
“Australia’s job market is holding up. And global headwinds support our forecast for a July rate cut—potentially followed by two more this year.”

Japanese Yen & Australian Dollar – Key Scenarios:

Bearish: A weaker CPI print, escalating geopolitical risks, or disappointing trade data from China could send AUD/USD below 0.6450.

Bullish: A stronger CPI reading or dovish Fed messaging could lift the pair toward the recent high of 0.6551.

Market Catalyst: Powell’s Testimony

Second day of congressional testimony. A dovish tone—hinting at a potential Q3 rate cut—could weigh on the U.S.

The Dollar could strengthen, limiting upside in AUD/USD and pushing USD/JPY higher.

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