AUD/JPY retreats to 104.50 after hitting 17-month highs

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AUD/JPY pulled back after hitting 104.72, the highest level since July 2024, on Wednesday.
The Japanese Yen gains support on potential intervention by authorities.
RBA’s rate-hike expectations in February remain alive as Australia’s inflation remained above the 2-3% range target.

AUD/JPY halts its five-day winning streak. The currency cross is trading around 104.50 after pulling back from 104.72, the highest level since July 2024, reached during the early Asian hours on Wednesday. The currency cross struggles as the Japanese Yen (JPY) receives support, as traders remain focused on potential intervention from 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

On Wednesday, the Bank of Japan’s (BoJ) October 29–30 Meeting Minutes showed that board members agreed rates would continue to rise if economic and price forecasts materialize. Several members noted that the likelihood of these forecasts being realized has increased, though policymakers stressed the need to maintain current policy to further confirm that positive wage-setting behavior remains intact.

The AUD/JPY cross may regain its ground as the Australian Dollar (AUD) continues to gain following the release of the Reserve Bank of Australia’s (RBA) December Meeting Minutes, which indicated that board members are becoming less confident that monetary policy remains sufficiently restrictive.

Australia’s headline inflation rose to 3.8% in October 2025 from 3.6% in September, remaining above the RBA’s 2–3% target range. As a result, markets are increasingly pricing in a rate hike as early as February 2026, with both the Commonwealth Bank of Australia and National Australia Bank projecting a rise to 3.85% at the RBA’s first policy meeting of the year.

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.