Australian Dollar softens against Japanese Yen as BoJ hikes rate to highest since 1995

The AUD/JPY cross loses traction to around 113.20 during the Asian trading hours on Tuesday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) following the Bank of Japan (BoJ) interest rate decision. The attention will shift to the Reserve Bank of Australia (RBA) interest rate decision later in the day. 

As widely expected, the BoJ decided to raise the short-term interest rate by 25 basis points (bps) to 1.0% from 0.75% after concluding the two-day monetary policy review meeting on Tuesday. The BoJ makes a rate decision by a 7-1 vote. According to the Monetary Policy Statement, the board members will continue to increase the policy rate in response to developments in economic activity, prices and financial conditions.

BoJ Governor Kazuo Ueda, who is hospitalized for medical treatment, missed the meeting and did not vote. Deputy Governor Shinichi Uchida will hold a press conference on Ueda's behalf at 06:30 GMT to explain the policy decision.

On the Aussie front, the RBA is set to keep the Official Cash Rate (OCR) on hold at 4.35% at its June policy meeting on Tuesday, with money markets paring bets on further tightening. This would be a pause following three consecutive 25 bps rate hikes earlier this year. Traders will closely monitor the press conference to see whether RBA Governor Michele Bullock signals some comfort at the current rate or keeps the door open to further moves to counter stubborn price pressures.