The risk-sensitive AUD/JPY currency pair mirrors the current risk mode, as the Australian dollar weakens following the release of the S&P Global Preliminary Purchasing Manager Index (PMI) for March. The composite PMI dropped to 48.1 from the previous 50.6, while the manufacturing PMI fell to 48.7 from 50.5, and the service PMI declined to 48.2 from 50.7.

The March Flash PMI results indicate a sustained economic slowdown into 2023. Despite easing price indicators, uncertainty regarding inflation persists due to high service industry input prices and labor costs. As the Reserve Bank of Australia (RBA) prepares for its April meeting, strong employment figures and ongoing inflation uncertainty may result in a closely contested decision on whether to pause the tightening cycle amid global financial instability.

Japan's Consumer Price Index (CPI) for February showed a YoY rate of 3.3%, compared to the expected 4.1% and the previous 4.1%. Excluding food and energy, the index came in at 3.5%, against the expected 3.4% and the previous 3.2%. The slowdown in headline CPI can be attributed to government subsidies for gas and electricity bills aimed at mitigating rising living costs. However, many economists argue that broader price pressures within the economy remain strong, potentially leading the Bank of Japan (BoJ) to phase out or abandon its yield curve control policy soon. Although the Core figure still looks sticky. 

In addition to Japan's CPI, the country's flash PMI data will be released on Friday. The AUD/JPY pair's movement is likely to be influenced by risk sentiment, as uncertainty arises from the potential impact of the banking crisis on US credit conditions in the coming months. This uncertainty could subsequently affect economic activity and inflation. Federal Reserve Chair Jerome Powell acknowledged this uncertainty on Wednesday, stating, "We simply don't know."