Japanese Yen and Aussie Dollar News: Trade and Wage Growth in Focus

USD/JPY: Trade in Focus Amid Looming Tariffs

The yen is at a critical juncture—BoJ rate hikes and US trade policies could set the tone. On Wednesday, February 19, Japan’s trade data will put the USD/JPY pair and the Bank of Japan in the spotlight.

Economists forecast Japan’s trade balance to shift from a ¥130.9 billion surplus to a ¥1,200 billion deficit. Meanwhile, exports are predicted to rise 7.9% year-on-year in January, up from 2.8% in December, with imports also expected to surge.

Rising overseas and domestic demand could signal stronger economic activity in Q1 2025. Following private consumption’s resilience in Q4 2024, import trends indicate domestic consumption could fuel demand-driven inflation, supporting a Bank of Japan rate hike. With trade contributing around 47% to GDP, rising exports would also contribute to Japan’s economic growth.

Beyond the headline data, US-Japan trade relations remain in focus. While Japan’s overall trade balance is expected to shift to a deficit, a widening US-Japan trade surplus may draw US President Trump’s attention. Tariffs on Japanese goods and services could weaken demand, impacting the labor market and wage growth. Softer wages would dampen demand-driven inflation and lower expectations for a near-term BoJ rate hike.

Expert Views on Japan’s Economy

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, commented on Monday’s Q4 GDP report from Japan:

“Japanese Dec qtr GDP +0.7%qoq/+1.2%yoy, stronger than expected with firm final demand, consumption up slightly (rather than down as expected) with net exports adding to growth and inventory detracting. Will keep BoJ on track for a gradual hiking in rates.”

Stronger-than-expected imports and exports could drive the USD/JPY toward 150 on BoJ rate hike bets.

USD/JPY Trends: US Housing Market in Focus

Shifting to the US housing market, key sector data will influence US dollar demand. Economists predict building permits will fall 0.8% in January after a 0.7% drop in December, while housing starts are expected to tumble 9%.

Given economists consider the housing sector a barometer for the US economy, weaker readings could signal softening consumer sentiment. A decline in sentiment may affect spending and inflation, potentially pulling the USD/JPY pair toward 150. Conversely, stronger housing data could support a more hawkish Fed rate path, driving the pair to the crucial 153 level.

Explore in-depth USD/JPY trade setups and expert forecasts here.

AUD/USD: Wage Growth Crucial for the RBA

Following the RBA’s February 18 rate cut, wage growth trends will be crucial in determining the central bank’s future policy stance and AUD/USD trajectory. Economists forecast wage growth to ease to 3.2% year-on-year in Q4 2024, down from 3.5% in Q3 2024.

Softer wage growth could impact household spending, potentially dampening demand-driven inflationary pressures. A softer inflation outlook would raise bets on another RBA rate cut, dragging the AUD/USD pair below $0.63. Conversely, stronger wage growth may keep the RBA on hold, potentially driving the pair toward $0.64.

On February 18, RBA Governor Michele Bullock highlighted the influence of wage growth on monetary policy, stating:

“A slowdown in wage growth, disinflation in market services, a sustained decline in housing costs, and a partial recovery in supply-side conditions could support another rate cut.”

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

Australian Dollar Daily Chart

Heading into the US session, softer-than-expected US housing sector data could support an H1 2025 Fed rate cut. A narrowing of the US-Aussie interest rate differential in favor of the Aussie dollar may drive the AUD/USD pair toward $0.64.

Conversely, rising building permits and housing starts could widen the rate differential, potentially pulling the pair below $0.63.

Beyond the data, US tariff developments also require consideration. The threat of sweeping US tariffs could impact the Aussie economy and Aussie dollar demand as Australia has a trade-to-GDP ratio above 50% and has one-third of exports bound for China.

Market Trends: Central Banks and Trade Policies in Focus

Key macroeconomic drivers influencing currency markets include:

• Bank of Japan Signals: Forward guidance crucial amid increasing speculation about a BoJ rate hike.
• FOMC Commentary: Mixed US data leaves the pairings exposed to Fed insights.
• AUD/USD Outlook: Labor market and inflation data, coupled with tariff developments, will dictate Aussie dollar demand.

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