AUD/JPY Slides on Stronger Yen and Intervention Risk

The AUD/JPY pair has edged lower to around 111.10 in early European trading on Friday, as the yen strengthened and markets remain cautious about possible currency intervention from Japan's authorities.

While the Bank of Japan recently lifted its policy rate to 1.25%, signaling openness to further tightening, including a potential back-to-back move in October, two officials dissented, making the decision less hawkish than some expected.

The surge in 10-year Japanese Government Bond yields to a 30-year high above 3% indicates deep structural shifts that are dismantling the yen carry trade. As the Bank of Japan eyes a potential interest rate hike in October, the yield differential that previously favored the Australian dollar is shrinking fast.