- AUD/JPY faces headwinds as the Japanese Yen rises due to rising global trade uncertainties, boosting safe-haven demand.
- Markets are closely watching US-Japan bilateral trade talks, with Tokyo aiming to finalize a deal by June.
- Planned policy measures under the re-elected Australian PM Albanese could fuel inflation, potentially reducing the RBA’s flexibility to lower interest rates.
AUD/JPY trades subdued near 93.40 during European hours on Monday after gaining for three consecutive sessions. The currency cross is under pressure as rising global trade uncertainties boost demand for safe-haven assets like the Japanese Yen (JPY). Thin market activity is expected due to a public holiday in Japan.
Over the weekend, US President Donald Trump confirmed ongoing trade talks with China, though no direct meetings with Chinese President Xi Jinping are scheduled. Meanwhile, China’s Commerce Ministry announced it is reviewing a US proposal to restart negotiations.
Markets are also monitoring US-Japan bilateral trade discussions, as Tokyo pushes to conclude an agreement by June. Japan is urging Washington to reconsider additional tariffs on Japanese automobiles, aiming to dismantle Trump-era trade measures.
The AUD/JPY cross may regain its ground as the Australian Dollar (AUD) gains ground against its peers after Prime Minister Anthony Albanese secured a second three-year term in the 2025 Federal Election. With over 45% of votes counted, Albanese’s Labor Party has claimed a parliamentary majority. His administration has pledged disciplined governance focused on cost-of-living relief, trade stability, and expanded investment in renewable energy, housing, tax cuts, and healthcare. However, these initiatives could stoke inflation, potentially limiting the Reserve Bank of Australia’s (RBA) room to cut interest rates.
Economic data further supported the AUD. The TD-MI Inflation Gauge rose 0.6% MoM in April, easing from March’s 0.7%, but marking a second consecutive monthly increase. Annual inflation also climbed to 3.3% from 2.8%, signaling persistent price pressures.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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