AUD/JPY holds gains around 103.00 following BoJ policy decision

AUD/JPY continues its winning streak for the third straight session, trading around 103.00 during Asian hours on Friday. The currency rose significantly as the Japanese yen (JPY) fell after members of the Board of Directors of the Bank of Japan (BoJ) decided to raise the short-term interest rate by 25 basis points to 0.75% from 0.50%, as was widely expected. The Bank of Japan raised its benchmark interest rate to its highest level in 30 years, as it seeks to push ahead with policy normalization set out last year.

The Bank of Japan’s policy statement showed that the decision was taken unanimously. The Bank of Japan expects real interest rates to remain significantly low, and reiterated that it will continue to raise interest rates if economic activity and prices develop in line with its expectations. The policy statement also noted that the central bank will conduct monetary policy as appropriate from the perspective of achieving the 2% inflation target in a sustainable and stable manner.

The AUD/JPY pair is also rising as the Australian Dollar (AUD) receives support from investor caution following the release of Australia’s consumer inflation forecast, which rose to 4.7% in December from November’s three-month low of 4.5%, supporting the Reserve Bank of Australia’s (RBA) hawkish stance.

Private sector credit in Australia rose 0.6% month-on-month in November, beating expectations of 0.2% but slowing from October’s 0.7% increase. On an annual basis, credit growth rose to 7.4% year-on-year from 7.3%, marking the fastest pace since January 2023.