AUD/JPY breaks below 96.50 on hawkish sentiment surrounding the BoJ

• AUD/JPY falls slightly as rising real wages reinforce expectations that the BoJ will raise rates further before the end of 2024.
• BoJ’s Takata said that “if the economy and prices develop as expected, we will adjust the policy rate in several stages.”
• RBA Governor Michele Bullock said it was too early to consider rate cuts.

AUD/JPY is regaining recent gains from the previous session to trade around 96.30 during Asian hours on Friday. The Japanese yen (JPY) is rising against the Australian dollar (AUD) as rising real wages in July fuel speculation that the Bank of Japan (BoJ) may implement another rate hike before the end of 2024.

Japan’s labor income rose 3.6% year-on-year, a slowdown from June’s 4.5% increase but the fastest since January 1997, beating market expectations of 3.1%.

The Japanese yen also got support from hawkish comments from Bank of Japan (BoJ) board member Hajime Takata on Thursday. Takata said that “if the economy and prices move in line with our forecast, we will adjust the policy rate in several stages.”

The BoJ’s Takata also stressed that the domestic economy is recovering moderately, despite some signs of weakness. Although stock and currency markets have seen significant volatility, Takata stressed that the BoJ remains optimistic about achieving its inflation target.

The AUD/JPY cross rose as the Australian dollar was supported by positive trade balance data released on Thursday. Australia’s trade surplus widened to 6.009 million MoM in July, beating expectations of 5.150 million and 5.589 million in the previous reading.

Additionally, Reserve Bank of Australia (RBA) Governor Michele Bullock spoke at The Anika Foundation in Sydney on “The Costs of High Inflation,” saying it is too early to consider rate cuts. Currently, the board does not expect to be able to cut rates anytime soon.