AUD/JPY weakens to near 96.50 on optimism over trade deal

• AUD/JPY softens to around 96.60 in Thursday's Asian session, losing 0.13% on the day.  
• RBA's Bullock said wary of cutting rates until it has more evidence on inflation.
• Fresh US-Japan trade agreement supports the Japanese Yen, but rising political uncertainty in Japan might cap its upside. 

The AUD/JPY cross declines to near 96.60 during the Asian trading hours on Thursday. The Australian Dollar (AUD) remains weak against the Japanese Yen (JPY) despite the hawkish remarks from the Reserve Bank of Australia (RBA) policymakers. 

RBA Governor Michele Bullock said on Thursday that the central bank is wary of cutting interest rates until it has gathered more evidence that inflation remains on a path back towards the 2.5% target. Bullock further stated that labor demand remains strong while core inflation is easing gradually. Her hawkish comments, however, fail to boost the Aussie as traders continue to assess the developments surrounding a new US trade deal. 

US Treasury Secretary Scott Bessent said on Thursday that he will meet with Chinese officials in Stockholm next week to discuss an extension to the deadline for negotiating a trade deal. Investors remain cautious on how tariff deals will play out.

Optimism surrounding the fresh US-Japan trade agreement provides some support to the Japanese Yen and acts as a headwind for the cross. US President Donald Trump on Wednesday announced a "massive" deal with Japan that includes "reciprocal" tariffs of 15% on the country's exports to the US. The new agreement is notably lower than the 25% previously threatened by Trump.

On the other hand, rising political uncertainty in Japan might exert some selling pressure on the JPY. Japanese Prime Minister Shigeru  Ishiba on Wednesday denied plans to resign. The speculation came after the ruling coalition's loss of its upper house majority in weekend elections, heightening fears about leadership stability.