Ella 
During the Asian session on Monday, AUD/JPY traded lower near 94.00, paring intraday losses. However, the Japanese yen (JPY) strengthened on hawkish comments from Bank of Japan (BOJ) Governor Kazuo Ueda over the weekend.
Kazuo Ueda raised the possibility of future interest rate hikes, which put downward pressure on AUD/JPY. Kazuo Ueda said the central bank may consider ending its negative interest rate policy when it sees its 2% inflation target is about to be achieved, the Yomiuri newspaper reported on Saturday.
On the other hand, following the Reserve Bank of Australia’s (RBA) decision last week to keep the Official Cash Rate (OCR) at 4.10%, the central bank explained that this choice gives them more time to assess the impact of recent interest rate hikes and evaluate economic prospects.
In his speech, RBA Governor Philip Lowe, whose term ends on September 18, stressed that he was closely monitoring the possibility of wages and profits exceeding levels consistent with achieving the inflation target by the end of 2025. Additionally, Lowe noted that unemployment can remain at levels not seen in nearly 40 years and wage growth remains strong.
Investors have expressed concerns about weak demand in China and the possibility of deflation. Notably, the Chinese government denies that China has officially entered a period of deflation, as the technical definition usually requires three consecutive months of falling consumer goods prices.
Regarding recent economic data from China, consumer price index (CPI) data for August was released last Saturday. The report showed year-on-year growth of 0.1%, an improvement from -0.3% last month. However, the data was below market expectations, which had expected consumer prices to rise 0.2%. The data suggests that although conditions have improved slightly, inflation remains subdued.
The Australian dollar is often seen as an alternative currency to the Chinese economy due to the close trade relationship between the two countries. This, in turn, could create headwinds for the AUD/JPY pair.
Traders of the pair can expect to get a clearer picture of China’s economic conditions this week. This will include a better understanding of the obstacles the Chinese government faces as it tries to implement the monetary and fiscal policies necessary to sustain its target of 5% gross domestic product (GDP) growth this year.
