EUR/JPY traded near 184.60 on Wednesday, up 0.58% on the day, as the Japanese Yen weakened. The rise came as markets questioned how fast Japan might normalise monetary policy. Local media said Prime Minister Sanae Takaichi warned about more rate hikes during a meeting last week with Bank of Japan (BoJ) Governor Kazuo Ueda. Ueda said they discussed general economic and financial conditions, and that no specific policy requests were made.

BoJ Policy Signals And Yen Weakness

Reports that some board nominees may favour looser policy added to the view that normalisation will stay slow. As a result, markets pulled back expectations for near-term rate hikes in Japan, which pressured the Yen. In the Euro area, the Euro stayed firm after European Central Bank (ECB) President Christine Lagarde said inflation and the current rate level are in a good place. She said policy decisions will be made meeting by meeting and will depend on incoming data. German data were mixed. The GfK Consumer Confidence index for March fell to -24.7 from a revised -24.2 in February, below the -23.5 forecast. Germany’s fourth-quarter GDP was confirmed at 0.3% quarter-on-quarter and 0.4% year-on-year. Eurozone January HICP was revised to -0.6% month-on-month from -0.5%, while the annual rate was confirmed at 1.7%. Core HICP was confirmed at -1.1% month-on-month and 2.2% year-on-year.

EURJPY Outlook And Trade Positioning

With the BoJ seen as reluctant to tighten, the Yen still looks vulnerable. That backdrop supports EUR/JPY, which is now testing the 184.60 area. Traders may look for ways to benefit if the pair continues to grind higher in the coming weeks. This cautious BoJ stance comes even though Japan’s national core CPI for January held at 2.0%, staying above the BoJ’s target for an extended period. This supports the view that political concerns may be outweighing the data, which can favour long EUR/JPY positions. The market is now focused on spring wage negotiations, which could still force a policy shift. Earlier, the carry trade—borrowing in low-yielding Yen to invest in higher-yielding currencies—drove markets through much of 2025. The gap between a patient ECB and a hesitant BoJ suggests this theme could continue. This keeps strategies that benefit from the interest-rate differential in focus. On the Euro side, the currency remains steady as the ECB stays in wait-and-see mode. Flash estimates for February showed Eurozone inflation at 2.6%, suggesting disinflation is not fast enough to force near-term rate cuts. This steadier ECB outlook makes the Euro a practical way to express a bearish view on the Yen. For derivatives traders, buying EUR/JPY call options may be attractive. This can capture upside if Yen weakness continues, while limiting risk to the premium paid. Out-of-the-money calls with one- to two-month expiries may offer a lower-cost way to position for another move higher. Because a surprise policy change or verbal intervention from Japanese officials can trigger sharp reversals—as seen last year in 2025—risk management matters. Buying cheap, far out-of-the-money EUR/JPY put options can help protect against a sudden drop. This can act as a hedge in a trade that remains politically sensitive. Create your live VT Markets account and start trading now.

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