Australian dollar approaches 35-year high against yen as central bank policies diverge

The Australian dollar has surged to its strongest level against the Japanese yen in roughly 35 years, with the AUD/JPY pair hitting 114.7540 on June 2. That’s the kind of number forex traders circle in red marker and tape to their monitors. The rally reflects a growing chasm between how Australia and Japan are handling monetary policy. The Reserve Bank of Australia has maintained a hawkish posture focused on controlling inflation, while the Bank of Japan continues to run a comparatively accommodative playbook. Policy divergence drives the move For much of the first half of 2026, the AUD/JPY exchange rate traded comfortably between 113 and 114. That’s a remarkable perch for a currency pair that spent years oscillating at much lower levels. The RBA’s approach has been straightforward: keep rates positioned to fight inflation, signaling willingness to act further if price pressures persist. The yen’s weakness isn’t new. It’s been a multi-year trend driven by the persistent gap between Japanese interest rates and those offered by Australia, the US, and Europe. Japan’s intervention card Tokyo hasn’t been a passive observer in all of this. Japan conducted significant yen-buying intervent...