EUR/JPY fell 0.15% to around 182.40 in Asian trade on Monday. The Japanese Yen rose as a safe-haven currency during a public holiday in Japan, while uncertainty over US trade policy continued.
Japan’s markets are closed on Monday for The Emperor’s Birthday. Markets stayed cautious after a Supreme Court ruling against tariffs imposed by President Donald Trump under the International Emergency Economic Powers Act (IEEPA).
Trade Policy Uncertainty Drives Safe Haven Flows
Trump criticised the Supreme Court decision. He also announced a 15% rise in import duties worldwide.
In Japan, January inflation data reduced expectations of a near-term Bank of Japan rate hike. Headline CPI rose 1.5% year on year, down from 2.1% in December. CPI excluding fresh food was 2.0%, down from 2.4% previously.
In Europe, the European Parliament’s trade chief said the EU will propose freezing ratification of a trade deal with the US. According to Bloomberg, the freeze would stay in place until the EU receives details on US trade policy.
In the euro area, preliminary February HCOB PMI data improved. The Composite PMI rose to 51.9, above forecasts of 51.5 and January’s 51.3.
Rate Differentials Remain The Main Driver
This time last year, EUR/JPY came under pressure after sudden uncertainty around US trade policy. The announcement of a global 15% import duty triggered a classic flight to safety. That briefly lifted the Japanese Yen, even with thin trading due to Japan’s holiday.
But the Yen’s safe-haven boost did not last. After the initial move, the key driver returned to interest rate differences. The Bank of Japan has stayed cautious. Tokyo’s January core CPI came in at 1.8%, still below the level needed to justify aggressive tightening. This keeps the Yen structurally weak against higher-yielding currencies.
On the Euro side, optimism from last year’s stronger PMI readings has faded. Trade tensions weighed on sentiment through 2025. The latest flash HCOB Composite PMI is at 50.2, which signals only slight growth and a clear cooling from 51.9 a year ago. This points to the European Central Bank being nearer to rate cuts than rate hikes.
For traders, this means the main driver of EUR/JPY is still the wide interest rate gap, not short-term risk headlines. Strategies may focus on carry trades, such as staying long the pair through futures or CFDs. Volatility has eased from last year’s highs, which can make options approaches like selling out-of-the-money JPY calls attractive for premium income.
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