AUD/JPY remains below 104.50 as Japan signals intervention readiness

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AUD/JPY declines after four days of gains, trading around 104.30 during the European hours on Tuesday. The currency cross has pulled back from 104.62, the highest level since July 2024, which was recorded in the previous session.

AUD/JPY edges lower after reaching a 17-month high of 104.62 on Monday.
The JPY gains support from potential intervention after Japan’s finance minister signaled readiness to curb excessive moves.
The Australian Dollar rises after RBA Minutes showed doubts over policy restrictiveness amid persistent inflation pressures.

The AUD/JPY cross struggles as the Japanese Yen (JPY) receives support from potential intervention by Japanese authorities. Japan’s Finance Minister Satsuki Katayama said on Tuesday that the official has a free hand in dealing with excessive moves in the Yen. Her remarks followed comments from top currency diplomat Atsushi Mimura, who emphasized that officials would take “appropriate” action against excessive exchange-rate volatility, reflecting concern over sharp, one-sided trends.

The Japanese Yen also finds modest support after Prime Minister Sanae Takaichi noted that national debt remains high and signaled the possibility of reducing new bond issuance in the FY2026 budget. Lower bond supply could help stabilize or lift Japanese government bond yields, narrowing yield differentials with overseas markets and offering some support to the JPY. However, the impact is likely to remain limited unless accompanied by concrete fiscal measures or shifts in Bank of Japan (BoJ) policy. Takaichi further clarified that responsible, proactive fiscal policy does not mean irresponsible bond issuance or tax cuts.

The AUD/JPY cross may regain its ground as the Australian Dollar (AUD) receives support after the release of the Reserve Bank of Australia (RBA) Minutes of its December monetary policy meeting. The RBA Meeting Minutes showed that board members signalled growing less confident that monetary policy remains restrictive, as evidence mounts that inflation pressures may prove more persistent than previously expected.

RBA policymakers also highlighted that they would assess policy at future meetings, noting that G4 inflation data had been released ahead of the February meeting. They discussed whether a rate increase might be needed at some point in 2026 and felt that it would take a little longer to assess the persistence of inflation.

Bank of Japan FAQs

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

What has been the Bank of Japan’s policy?

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

How do Bank of Japan’s decisions influence the Japanese Yen?

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.