AUD/JPY rises above 101.00 due to growing uncertainty surrounding the BoJ policy outlook

• AUD/JPY strengthens due to increased uncertainty over the BoJ rate-hike plans.
• The LDP coalition secured only 215 of the 465 lower house seats, missing the 233-seat majority threshold.
• The Australian Dollar gains support due to the hawkish mood surrounding the Reserve Bank of Australia.

The AUD/JPY pair recovers its recent losses seen over the past two sessions, trading around 101.20 during early European hours on Monday. The upward movement in AUD/JPY could be linked to growing uncertainty surrounding the Bank of Japan's (BoJ) rate-hike plans, now compounded by Japan’s ruling coalition losing its parliamentary majority.

In Sunday's election, Japan's long-standing ruling coalition lost its majority in the lower house for the first time since 2009, casting doubt on the BoJ's capacity to proceed with further rate hikes. The Liberal Democratic Party and its coalition partner, Komeito, secured only 215 of the 465 lower house seats, missing the 233-seat majority threshold. Meanwhile, the main opposition, the Constitutional Democratic Party of Japan (CDPJ), gained 148 seats, up from 98.

The Australian Dollar (AUD) finds support following hawkish remarks from the Reserve Bank of Australia (RBA). The RBA emphasized that the current cash rate of 4.35% is sufficiently restrictive to bring inflation within its 2%-3% target range while sustaining employment levels, making an imminent rate cut unlikely.

Last week, RBA Deputy Governor Andrew Hauser underscored Australia’s robust labor participation rate and clarified that, while the RBA is data-dependent, it avoids over-reliance on specific figures. Traders remain cautious as they await key domestic inflation data due on Wednesday, which could influence the RBA’s future monetary policy stance.