Yen reversed earlier gains in the European session as traders reassessed the Bank of Japan’s latest economic projections and policy stance. While BoJ maintained its upbeat tone on inflation eventually aligning with the 2% target, near-term commentary and projections have dampened rate hike expectations.
The central bank sharply upgraded core CPI forecasts for fiscal 2025 to 2.7%, but emphasized that the jump was mainly die to food prices. It sees inflation quickly falling back, with underlying price growth remaining subdued.
Even though core CPI is now expected to hit 1.8% in fiscal 2026 and reach 2.0% in 2027, the market appears to be focusing on BoJ’s cautious tone and lack of urgency to tighten further. The reaction suggests that traders may now be dialing back expectations for any near-term policy action.
Technically, AUD/JPY’s bounce solidifies the case that price actions from 97.41 are merely forming a sideway consolidation pattern. Thus, near term bullish outlook is maintained. Firm break of 97.41 will target 61.8% projection of 86.03 to 95.63 from 92.30 at 98.23 next.
