AUD/JPY Slips as Tokyo Inflation Spurs Hawkish BoJ Bets

Key Moments

Spot Overview and Market Context

The AUD/JPY cross is trading lower near 109.40 during early European hours on Friday, extending its recent pullback. The Japanese Yen is firming against the Australian Dollar after a sharp rise in Tokyo inflation metrics in September, which is underpinning expectations that the Bank of Japan (BoJ) may continue to normalize policy.

Figures published by the Statistics Bureau of Japan on Friday show that the headline Tokyo Consumer Price Index (CPI) increased 2.7% in September, compared with 1.9% previously. The measure of Tokyo CPI excluding fresh food also advanced 2.7% year over year in September, up from 1.8% in August and above the market forecast of 2.4%. Tokyo CPI excluding Fresh Food and Energy rose 3.0% year over year in September, accelerating from 2.0% in the prior reading.

“Core inflation will continue to accelerate as a trend due to rising energy costs from the Middle East conflict and subsequent second-round effects,” said Masato Koike, senior economist at Sompo Institute Plus, adding that he anticipated the BoJ to raise its policy interest rate in December.

BoJ Policy Caution Versus Strengthening Corporate Sentiment

Commentary from Rabobank points to a cautious stance at the BoJ despite strengthening activity indicators. The bank’s analysts note that the BoJ “doesn’t want to keep raising rates rapidly,” citing September meeting minutes that reveal a divided Governing Council. According to their assessment, “some hawks” pushed for additional tightening, while others “pointed to weak private consumption and warned against hasty action,” and government officials “urged weighing the cumulative impact of past rate increases.”

Rabobank also highlights that “with the latest Tankan survey the most upbeat for large manufacturers since 2018 the Bank may not have a choice – assuming it is the one choosing, not Bessent,” underscoring the contrast between cautious policymakers and improving business sentiment.

Technical Picture: Bearish Bias Below the 100-day SMA

On the daily time frame, AUD/JPY retains a negative short-term structure as the pair trades beneath both the 20-period Bollinger middle band and the 100-day simple moving average (SMA). Price action is clustered toward the lower edge of the Bollinger envelope, while the 14-day Relative Strength Index at 32 sits just above oversold territory. This configuration suggests that selling pressure remains in control, although its strength may be moderating.

On the upside, the first significant barrier is located at the 110.00 psychological mark, followed by the 20-period Bollinger middle band near 110.70. If buyers manage to extend a recovery beyond that area, attention would turn to the upper Bollinger band at 112.30 and then the 100-day SMA at 112.60, which together form a broader resistance zone that has been limiting rebounds.

On the downside, support is initially seen at the lower Bollinger band around 109.15. A decisive move below this level would likely refocus selling interest toward the October 1 trough at 108.71, with the February 17 low at 107.69 acting as a subsequent target.