AUD/JPY Slumps as Tokyo Inflation Fuels BoJ Hawkish Sentiment

The AUD/JPY cross is trading lower near 109.40 during early European hours on Friday, extending its recent pullback.

The Japanese Yen is firming against the Australian Dollar after a sharp rise in Tokyo inflation metrics in September, which is underpinning expectations that the Bank of Japan (BoJ) may continue to normalize policy.

Figures published by the Statistics Bureau of Japan on Friday show that the headline Tokyo Consumer Price Index (CPI) increased 2.7% in September, compared with 1.9% previously.

Sompo Institute Plus senior economist Masato Koike anticipates the BoJ to raise its policy interest rate in December, stating 'core inflation will continue to accelerate as a trend due to rising energy costs from the Middle East conflict and subsequent second-round effects.'