Australian Dollar losses against Japanese Yen persist after BoJ rate decision

• Following the BoJ’s policy decision, continued Japanese Yen strength keeps AUD/JPY under pressure.
• At 1.25%, the BoJ’s policy rate was left unchanged, in line with expectations.
• An RBA rate rise to 4.85% carried an 80% probability in ASX futures pricing as of 29 October.

The Bank of Japan (BoJ) kept its short-term interest rate at 1.25% as board members concluded their two-day monetary policy review. With the Japanese Yen (JPY) remaining firmer after the decision, AUD/JPY is extending its decline for a second successive day, trading at around 110.80 in Friday’s Asian session.

Expectations of additional tightening by the Reserve Bank of Australia (RBA) are supporting the Australian Dollar (AUD), potentially limiting further declines in AUD/JPY. Following stronger-than-forecast inflation figures and hawkish remarks from RBA officials, markets have increasingly priced in a rate rise at the central bank’s forthcoming meeting on 3 November.

An 80% probability of a rate rise to 4.85% at the next RBA Board meeting was implied by the ASX 30-day interbank cash rate futures November 2026 contract, which traded at 95.22 as of 29 October.

Firmer inflation reinforces TD Securities’ expectations of a final RBA rate rise

A stronger third-quarter CPI reading has bolstered expectations of another RBA move next week, according to TD Securities. The bank now expects the central bank to "lift the cash rate 25bps at next week's meeting to 4.85%," saying the firmer inflation result "validates the Bank's decision to hike last month". It also argues that "likely forecast upgrades to the Bank's inflation track in the November Statement on Monetary Policy likely justify a follow-up 25bps hike next week." However, TD Securities believes this "hike should mark the last in the cycle," indicating that the tightening phase may be approaching its conclusion.