Japanese Yen and Aussie Dollar News: BoJ and the Fed in the Spotlight

Trade Data and the Bank of Japan Under the Spotlight

On Wednesday, March 19, Japan’s trade data put the focus on the USD/JPY pair amid uncertainty surrounding Trump’s tariff policies.

Exports rose 11.4% year-on-year (YoY) in February, up from 7.3% in January, while imports fell 0.7%, after rising 16.2% in January. The jump in exports and a fall in imports suggested front-loading ahead of potential US tariffs and weak domestic demand.

Trade terms with the US could draw scrutiny from President Trump. Exports to the US increased by 10.5% while imports fell 2.7%, widening Japan’s trade surplus with the US to ¥919 billion.

While trade data gave insights into the demand environment, the Bank of Japan’s monetary policy decision and forward guidance remain key. Economists expect the BoJ to maintain interest rates at 0.5% later this morning.

Unless there is a market-disrupting surprise, the focus will shift to its policy outlook. Recent GDP, inflation, and household spending data have tempered expectations of an H1 2025 BoJ rate hike. President Trump’s tariff policies further complicated the central bank’s path forward.

Key factors for investors to watch in the BoJ decision:

• The BoJ’s view on US tariffs and their potential impact on Japan’s economy
• The BoJ will assess the effects of January’s rate hike on inflation and household spending.
• Spring wage negotiations (Shunto) and their potential influence on consumption and inflation.

Support for an H1 2025 BoJ rate hike could boost Japanese Yen demand, pushing the USD/JPY pair toward the March 11 low of 146.537. Conversely, concerns about Trump’s policies, wage growth, and consumption may drive the pair toward the March 3 high of 151.301.

Expert Views on the Upcoming BoJ Monetary Policy Decision

Tony Sycamore, market analyst at IG.com, commented on the upcoming BoJ decision:

“USDJPY closed flat overnight at 149.29 (+0.05%), ahead of today’s Bank of Japan interest rate meeting, where the BoJ is expected to keep rates unchanged at 0.50%. The focus will be on BoJ Governor Ueda’s guidance regarding the timing of the BoJ’s next rate hike, which the market currently anticipates to be in July. Nonetheless, an earlier hike in May or June is a non-negligible risk, as is a second-rate hike before the end of the year.”

According to the latest Reuters poll (March 4-11):

• 18 out of 61 economists expect a 25-basis point hike in Q2 2025.
• 40 of 57 forecast a Q3 2025 policy move, with 26 out of 37 predicting a July hike.
• The likelihood of a July hike has increased from 59% in February to 70% in March.

A marked deviation from these expectations could influence near-term USD/JPY price action.

USD/JPY Trends: FOMC Economic Projections and Press Conference in Focus

Late in the US session, the FOMC’s interest rate decision, Economic Projections, and press conference will impact the US dollar.

Economists expect the Fed to maintain interest rates at 4.5%. However, uncertainty surrounding Trump’s tariff policies and the effect on inflation and the economy have complicated the Fed’s policy outlook. The FOMC’s Economic Projections and Fed Chair Powell’s press conference could give much-needed clarity.

• A hawkish stance, with less than 60-basis points of rate cuts for the remainder of the year, could drive the USD/JPY pair toward the March high of 151.301.
• A dovish stance amid concerns about the economic outlook and expectations of softer inflation may pull the pair toward the March low of 146.537.

Explore expert forecasts and trade setups for USD/JPY in our latest market analysis here.

Westpac Leading Index in Focus Ahead of Crucial Labor Market Data

While the BoJ’s decision is the main focus in Asia, the AUD/USD pair has faced heightened volatility. Trump’s tariff policies and Beijing’s stimulus pledges have clouded the RBA’s policy outlook, leading to volatility in the Aussie dollar.

On March 19, Australia’s Westpac Leading Index offered insights into the economy. The Westpac Leading Index rose 0.1% month-on-month (MoM) in February, up from 0.1% in January. A softer-than-expected print could increase rate cut expectations, potentially pulling AUD/USD toward the 50-day EMA. Economists forecast the Index to increase by 0.2% in February.

Beyond today’s data, US tariff developments and Beijing’s stimulus efforts remain key risk factors.

Potential AUD/USD Scenarios:

• Bullish: Easing trade tensions, and fresh stimulus from Beijing may send the AUD/USD pair toward the 200-day EMA and the $0.65 level.
• Bearish: Escalating tariffs, and disappointing stimulus measures could send AUD/USD below the 50-day EMA toward $0.62.

For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.

Australian Dollar Daily Outlook: Fed Policy and Rate Differentials

Later in the US session, the FOMC Economic Projections and press conference will influence expectations for the US-Aussie interest rate differentials.

• Hawkish Fed: Upward revisions to GDP, inflation, and the Fed Funds Rate for December 2025 could pull the AUD/USD pair below the 50-day EMA, possibly toward $0.62.
• Dovish Fed: Lower GDP and inflation projections, alongside fewer Fed rate cuts, may drive the AUD/USD pair toward the 200-day EMA and $0.65.

Key Market Trends: Central Bank Policies and Trade Developments

Key macroeconomic drivers influencing forex markets include:

• USD/JPY: BoJ monetary policy decision and forward guidance.
• USD/JPY and AUD/USD: FOMC Economic Projections, Fed Chair Powell’s press conference, and US tariff developments.
• AUD/USD: Beijing’s stimulus news, US-China trade tensions, upcoming Aussie labor market data.

Read our expert analysis on USD/JPY and AUD/USD forecasts here for deeper insights.