**Japanese Yen and Aussie Dollar Forecasts: Japan Inflation Slows, USD/JPY Approaches Key Resistance**
*By James Hyerczyk, originally published on FX Empire*
Currency markets have started the week with notable movements centered around the Japanese yen and the Australian dollar, as traders react to key economic data from Asia and anticipate significant events later this week. The USD/JPY pair, in particular, has commanded heightened attention, approaching a critical resistance level of 150, as softer Japanese inflation data raises further questions about the Bank of Japan’s (BoJ) monetary policy strategy. Meanwhile, the Australian dollar has shown modest resilience as traders weigh global risk sentiment and upcoming economic releases.
This article offers in-depth analysis of the factors driving these currency pairs, examines how the global economic backdrop may influence their trajectories, and outlines potential scenarios for price movements in the short-to-medium term.
## USD/JPY Forecast: Soft Japanese Inflation and Central Bank Implications
The Japanese yen came under renewed pressure following weaker-than-expected inflation data, intensifying speculation that the Bank of Japan may delay any tightening moves. Friday’s release from Japan’s Statistics Bureau showed that Tokyo’s core Consumer Price Index (CPI), a leading indicator for national trends, fell from 2.1% to 1.6% year-on-year in January. This marked the lowest reading since March 2022.
### Key points from Japan’s inflation data:
– Tokyo core CPI dropped to 1.6% YoY in January, down from December’s 2.1%
– Headline Tokyo CPI declined to 1.6% annually, below the 1.8% expected
– Month-over-month prices dipped by 0.4%, indicating subdued consumer demand
– Deceleration largely driven by falling utility prices and subdued food inflation
These figures suggest that inflation in Japan is cooling more rapidly than markets anticipated, potentially weakening any case for imminent policy normalization by the BoJ. As a result, traders have recalibrated expectations regarding interest rate hikes or an exit from the central bank’s ultra-loose monetary policy in the near term.
The yen’s decline against the U.S. dollar was further amplified by broader strength in the greenback, following stronger-than-expected U.S. economic data released earlier in the week.
### Technical outlook for USD/JPY:
– USD/JPY is trading close to the psychological resistance level at 150.00
– A sustained break above 150 could open the door toward the 151.90-152.00 area, last seen in November 2022
– Support lies near the 147.50 level, followed by the 100-day moving average around 146.25
– Momentum indicators suggest bullish bias, but overbought conditions may trigger a temporary pullback
Traders remain cautious near the 150 level, as any intervention threats from Japanese authorities could limit further USD/JPY upside. Historically, Tokyo has intervened in currency markets to stem excessive yen weakness near this zone.
## Bank of Japan in Focus: Mixed Messages on Future Policy
In recent comments, BoJ officials maintained their accommodative stance despite signals that policymakers are gradually preparing for change. Governor Kazuo Ueda has reiterated that while Japan’s inflation trend is improving, wage growth and underlying demand must firm up further before considering policy tightening.
### Factors influencing BoJ policy outlook:
– Tokyo CPI data raises doubts about near-term policy tightening
– Wage growth still inconsistent across sectors, despite better corporate earnings
– Japan’s economy contracted in Q3 and Q4 of 2023, indicating potential risks of a recession
– Global disinflation trends may exert downward pressure on Japan’s import prices
Analysts now expect the BoJ to maintain its negative interest rate policy for longer into 2024, potentially waiting until significant data in the spring—particularly annual wage negotiations—before taking any action. Some forecasts have pushed potential rate hikes out to mid or late 2024.
## US
Explore this further here: USD/JPY trading.