AUD/JPY aims an establishment above 92.50 as risk-on profile soars, China CPI eyed

• AUD/JPY is looking to shift its business profile above 92.50 amid positive market cues.
• The sustainability of contraction in the Japanese economy has refreshed fears of a lower inflation rate.
• China’s annual inflation data is expected to decline to 1.5% from the former release of 2.1%.

The AUD/JPY pair is oscillating above the critical resistance of 92.50 in the early Asian session. The risk barometer accelerated gains in the New York session after climbing above the critical hurdle of 92.30. A decent recovery in the AUD/USD pair has set a bullish ground for the AUD/JPY asset.

The cross has faced immense selling pressure as the Japanese yen failed to capitalize on better-than-anticipated Gross Domestic Product (GDP) data. The annualized data contracted by 0.8% vs. expected contraction by 1.1% and the prior release of -1.2%. While the quarterly data has contracted by 0.2% against the consensus and the prior release of 0.3% contraction.

Figures are more upbeat than expected but the growth rate is still contracting, which creates a ground for more economic stimulus from the Bank of Japan (BOJ) ahead. This has triggered fears of a decline in inflation ahead as a slowdown in economic activities indicates sluggish demand by the households.  

Bank of Japan (BOJ) Governor Haruhiko Kuroda has been emphasizing the need of pushing inflation higher. He advocated that a significant rise in wage inflation could spur overall inflation in the Japanese economy. A jump in wage inflation to 3% could help in achieving sustainability of the inflation rate at 2%.

On the Australian front, Aussie bulls are awaiting the release of China’s Consumer Price Index (CPI) data for fresh impetus. Economists at TD Securities see the annual inflation data could decline to 1.5% from the former release of 2.1%. This may force the People’s Bank of China (PBOC) to adopt an extreme dovish stance on interest rates. Prolonged Covid-19 lockdown restrictions in China have dampened overall demand in the economy, which has trimmed consumer inflation expectations. Now, the reopening of the economy after protests from households could bring a recovery in the economy.