The EUR/JPY exchange rate fell to about 176.60 during the Asian session on Friday. This decline happened as the Japanese Yen gained strength against the US Dollar, following the Bank of Japan’s (BoJ) September policy meeting minutes and comments from Japanese officials.

BoJ Minutes and Impact on Yen

The BoJ’s minutes revealed that more policymakers are thinking about raising interest rates, with some calling for action soon. This positive outlook could boost the Yen further against the Euro. Comments from Japanese officials also supported the Yen. Finance Minister Satsuki Katayama mentioned that they are closely watching foreign exchange movements. At the same time, the European Central Bank’s (ECB) cautious approach may restrict the Euro’s decline against the Yen. ECB President Christine Lagarde stated that the bank is well-prepared and focused on maintaining its current position. ECB member Boris Vujcic expressed satisfaction with existing policies after hitting target inflation, reflecting market expectations of little interest rate reduction by 2026. The BoJ’s policies, bond yield differences, and global risk mood all affect the Japanese Yen’s value. As a safe-haven currency, it usually attracts investments during market uncertainty, which can increase its value.

EUR/JPY Market Outlook

The EUR/JPY is facing challenges near 176.50 as the gap between the Bank of Japan and the European Central Bank widens. The BoJ is signaling higher rates, putting upward pressure on the Yen. In contrast, the ECB is maintaining a steady stance, believing its job on inflation is mostly finished. The BoJ’s hawkish tone is supported by solid data, with Japan’s national Core CPI for October 2025 reaching 2.9%. This marks 18 consecutive months of inflation above the central bank’s 2% goal. Consequently, the 10-year Japanese government bond yield has climbed to 1.15%, a level not seen since 2012. Increased comments from Japanese officials also contribute to the Yen’s strength. We should pay attention to these warnings, recalling that direct currency market interventions occurred in late 2022 and throughout 2024 to support the Yen. This history suggests a lower tolerance for Yen weakness and a readiness to take action. On the flip side, the ECB’s cautious stance is likely to limit any significant rises in the Euro. Recent flash PMI data from Germany indicated a slight decline in manufacturing, and with Eurozone inflation easing to 2.1%, there’s little reason for the central bank to adopt a hawkish approach. The market expects only a minimal 25 basis point cut by late 2026, confirming the view of a prolonged pause. With this outlook, traders should think about strategies that benefit from a declining or range-bound EUR/JPY in the coming weeks. Buying put options could provide a straightforward way to profit from a downward move while protecting against risk. Alternatively, establishing bear put spreads would be a lower-cost way to take advantage of a moderate decline toward the 174.00-175.00 range. Create your live VT Markets account and start trading now.

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