• AUD/JPY gains ground to near 110.85 in Wednesday’s early European session.
• BoJ is expected to raise rates to 1.50% in December, according to Reuters poll.
• The cross keeps a bearish tone, with the price holds below the key 100-day SMA.
• The first upside barrier emerges at 111.00; the initial support level is seen at 110.20.

The AUD/JPY cross trades in positive territory around 110.90 during the early European trading hours on Wednesday. However, the potential upside for the cross might be limited amid hawkish comments from Japanese authorities.

Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Wednesday that underlying inflation is almost at the central bank’s 2% target. Himino added that financial conditions are still accommodative.

Earlier this week, BoJ Governor Kazuo Ueda stated that underlying inflation is near the 2% target. He further stated that if the bank raises the short-term policy rate, long-term interest rates are likely to rise steadily with the policy. Last week, board member Junko Koeda said the central bank should not become overly cautious about raising rates, at their highest in 31 years, given the significant upside risks to inflation.

According to a majority of economists in a Reuters poll, the Japanese central bank is likely to raise interest rates in December to 1.50%, following June and September increases.

BoJ signals inflation progress as markets eye December hike risk

Analysts at Danske Bank highlight a more confident tone from Bank of Japan Governor Ueda, who now judges that underlying inflation is "quite close" to the 2% target, pointing to tight labour markets and strong global AI demand as key sources of price pressure. Danske Bank notes that Ueda also cautioned that "failing to raise rates at an appropriate pace could push long-term bond yields higher," underscoring the risks of lagging behind the inflation trend. Looking ahead to the BoJ’s next meeting, which concludes on 30 October 2026, Danske Bank observes that markets expect rates to remain at 1.25% but will be focused on any guidance that keeps "a hike to 1.5% as early as December on the table."

Ueda leans mildly hawkish as inflation loop strengthens

FXS Speechtracker scores the speech at 7/10, slightly below Ueda’s 7.4/10 average, but the emphasis on “underlying inflation near 2%” and a positive wages–prices loop marks a modest hawkish tilt. Ueda highlights demand-led inflation from robust global activity, domestic capex and exports, alongside tight labor markets, while warning that miscalibrated policy could push long-term JGB yields higher, reinforcing the need to anchor core inflation near 2%.

At the same time, Ueda stresses no change in the fundamental bond taper approach and refuses to preannounce emergency bond measures, signaling a cautious, data-dependent stance. The message that properly calibrated rate hikes would allow long-term rates to rise “steadily” while keeping financial conditions accommodative supports a controlled normalization path, which is mildly supportive for the Yen as markets price a gradual shift away from ultra-easy policy.

Technical Analysis: Bearish outlook of AUD/JPY prevails under the 100-day SMA

In the daily chart, AUD/JPY keeps a bearish near-term tone as it remains below the 100-day simple moving average (SMA). Price is holding above the Bollinger middle band, the 20-day SMA, which suggests some short-term stabilization, while the Relative Strength Index (14) at 52.30 hints at neutral-to-slightly positive momentum rather than an oversold condition.

On the topside, initial resistance level emerges at the 111.00 psychological level, en route to the upper boundary of Bollinger band near 111.25. The more substantial barrier is located at the 100-day SMA around 112.10, where rallies are likely to face stronger supply.

On the downside, immediate support level is seen at the Bollinger middle band at 110.20. A deeper bearish extension will see a drop to the October 16 low of 109.34, followed by the lower limit of Bollinger band around 109.15 if sellers regain control.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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.

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.