• AUD/JPY gained ground on RBA’s hawkish stance on monetary policy.
• RBA Governor Michele Bullock did not rule anything in or out regarding policy decisions.
• Japan's Foreign Reserves decreased to $1,291.8 billion in January from the previous figure of $1,294.6 billion.

AUD/JPY trends upwards for the second consecutive day on Wednesday, trading around 96.70 during the Asian session. The hawkish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock on Tuesday have bolstered confidence in the Australian Dollar (AUD), contributing to its strength against the Japanese Yen (JPY).

The Reserve Bank of Australia (RBA) maintained its Official Cash Rate (OCR) at 4.35% on Tuesday, a move that was widely expected. RBA Governor Michele Bullock refrained from making any definitive statements about future policy decisions. She stressed the importance of balanced risks and highlighted the bank's ongoing efforts to gather data confirming a return of inflation to target levels. Governor Bullock mentioned a forecast of 2.8% inflation for the year 2025.

On the other side, Wednesday's release of Japan's Foreign Reserves report indicated a slight decrease, with the figure standing at $1,291.8 billion in January compared to December's figure of $1,294.6 billion. Additionally, on Tuesday, Labor Cash Earnings (Year-over-Year) showed improvement, registering at 1.0% in December compared to the previous reading of 0.7%, albeit falling short of the expected 1.3%.

The Japanese Yen receives support from expectations that another significant pay hike this year will contribute to sustained and stable inflation. This optimism is fueling hopes that the Bank of Japan (BoJ) may gradually move away from its ultra-dovish policy stance. Additionally, the BoJ has hinted at the possibility of ending its negative interest rate cycle, suggesting a potential shift in monetary policy direction.