AUD/JPY maintains position near 94.00, downside risks appear due to hawkish BoJ

• AUD/JPY may weaken as the Japanese Yen finds support from the Bank of Japan's hawkish policy outlook.
• The Australian Dollar declines after Thursday's disappointing Private Capital Expenditure data.
• RBA Deputy Governor Andrew Hauser highlighted that Australia's tight labor market remains a challenge for managing inflation.

AUD/JPY holds gains after two consecutive sessions of losses, trading near 94.00 during early European hours on Thursday. However, the currency cross faced downside pressure as the Japanese Yen gained support from strong expectations that the Bank of Japan (BoJ) will continue raising interest rates this year, driven by upside surprises in fourth-quarter inflation and robust wage growth.

Market participants in Japan are awaiting several key economic reports due on Friday. These reports, which include industrial production, retail sales, and Tokyo inflation, are expected to provide crucial insights into the BoJ's future monetary policy direction.

The AUD/JPY cross could have encountered headwinds after disappointing Australian Private Capital Expenditure data released on Thursday, which showed an unexpected 0.2% contraction quarter-on-quarter in Q4 2024, missing market forecasts of 0.8% growth. This follows an upwardly revised 1.6% expansion in the previous quarter.

On Thursday, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser expressed optimism about inflation trends but stressed the importance of seeing sustained progress. He also noted that Australia's tight labor market continues to pose a challenge for controlling inflation.

Additionally, a Wall Street Journal report on the Australian Dollar's outlook, citing the Commonwealth Bank of Australia (CBA), highlighted growing concerns over potential trade war risks driven by Trump. China's response to these threats will be a key factor influencing the future performance of the AUD.