Japanese Yen and Aussie Dollar News: China’s Economy and the BoJ in Focus

Wage Negotiations Spotlight the Yen and the Bank of Japan

On Monday, March 17, speculation over the Bank of Japan’s (BoJ) upcoming interest rate decision will drive USD/JPY movements. President Trump’s tariff policies have triggered economic uncertainties, overshadowing optimism about Japan’s spring wage negotiations (Shunto).

Recent inflation reports have also eased expectations for a March rate hike as inflationary pressures remain subdued. BoJ Deputy Governor Shinichi Uchida recently downplayed the chances of a near-term rate hike, saying:

“The pace is not such that we need to increase interest rates each time.”

Beyond assessing the impact of tariffs on Japan’s economy, the BoJ may also want to:

• Evaluate the effects of the January rate hike on household spending and underlying inflation.
• Consider the outcome of the spring wage negotiations and the potential impact on consumption and inflation.

Last week, Japan’s Rengo, the leading national trade union center, secured a 3.84% base pay rise, below its 4.51% target. Additionally, Rengo achieved a 5.46% average pay rise, below its demand of 6.09%.

Despite falling short of demands, base pay and average pay rises accelerated from last year’s 3.7% base pay rise and 5.28% average pay hike. This upward trend may fuel hopes that higher wages could boost consumer spending, supporting a more hawkish BoJ rate path.

Following Rengo’s updates, investors should track BoJ commentary on Monday, March 17. Support for a near-term rate hike could drag the USD/JPY pair toward the March 11 low of 146.537. Conversely, calls for caution amid Trump’s tariff policies fueled uncertainty could push the pair above 150.

Expert Views on Wages and Inflation

East Asia Econ, a research service specializing in the markets and macro of China, Japan, Korea, and Taiwan, commented on the Shunto 2025 results:

“Today’s shunto 2025 results are constructive, but not a game changer. Upside risks from other dynamics are bigger: part-time wages, the output gap, inflation expectations, processed food prices, rent, and pent-up inflation pressure in both PPI and public services prices.”

The BoJ may take time to assess whether higher wages will sustainably lift consumption and inflationary pressures.

What Do the Polls Say?

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

• 90% of economists expect Trump’s tariff policies to affect Japan’s economy negatively.
• 61 of 62 economists predict the BoJ will hold rates at 0.5% in March.
• 18 out of 61 economists forecast a 25-basis point hike in Q2 2025.
• 40 of 57 expect a Q3 2025 policy move, with 26 out of 37 signaling a July hike.
• While predictions for a Q2 2025 rate hike are similar to the February poll, expectations of a July hike have risen from 59% to 70%.

USD/JPY Trends: US Retail Sales in Focus

Later in the US session, US retail sales figures will be crucial amid rising recession fears. Economists forecast retail sales to rise 0.7% month-on-month (MoM) in February, following a 0.9% fall in January.

• Higher-than-expected retail sales could temper June Fed rate cut bets, potentially driving the USD/JPY pair toward the 149.358 resistance level and possibly 150.
• Another fall in sales may intensify speculation about a US recession, signaling a more dovish Fed rate path. In this scenario, the USD/JPY pair could drop toward the March 11 low of 146.537.

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

China Economy Puts the Aussie Dollar and RBA in Focus

While USD/JPY remains a key focus, economic data from China will influence near-term AUD/USD trends.

On March 17, Chinese data, including housing prices, industrial production, fixed asset investment, retail sales, and unemployment figures, will influence market sentiment.

• A softer decline in house prices, lower unemployment, and a pickup in retail sales could signal Beijing’s stimulus measures are gaining traction. A more robust Chinese economy may boost demand, supporting Aussie trade terms as China accounts for one-third of Australian exports.
• However, a sharper fall in house prices, rising unemployment, and weaker retail sales may cast doubt over Beijing’s 5% GDP target for 2025, weighing on AUD/USD.

Potential AUD/USD trends include:

• Bullish Scenario: Upbeat data from China, a de-escalation in the US-China trade war, and fresh stimulus from Beijing may send the AUD/USD pair toward the $0.63623 resistance level.
• Bearish Scenario: Weak Chinese data, escalating trade tensions, and underwhelming stimulus efforts could pull the AUD/USD pair 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: Retail Sales and Rate Differentials

Later in the US session, US retail sales could influence the US-Aussie interest rate differential.

• Stronger-than-expected retail sales may lower Fed rate cut bets, widening the rate differential in favor of the US dollar. This scenario could send AUD/USD below the 50-day EMA, targeting the crucial $0.62 support level.
• A further decline in retail sales may boost the chances of multiple Fed rate cuts, narrowing the rate differential. A more dovish Fed rate path could drive the AUD/USD pair toward the $0.63623 resistance level.

Key Market Trends: Central Bank Policies and Trade Developments

Key macroeconomic drivers influencing forex markets include:

• BoJ Forward Guidance: Wage growth will influence the BoJ’s policy outlook.
• US Economic Data and Tariff Policies: US Retail Sales and trade policies remain pivotal.
• AUD/USD Sentiment: Economic data from China, Beijing’s stimulus efforts, and US-China trade tensions will influence the RBA rate path and Aussie dollar trends.

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