The EUR/JPY dropped below 1.1600 to about 1.1590 during Asian trading on Thursday. This change happened as the Euro lost value against the Japanese Yen, following new sanctions by the European Union against Russia related to the ongoing conflict in Ukraine. The EU and the US imposed these sanctions due to concerns that Russia is not genuinely trying to resolve the conflict. Meanwhile, we await the Eurozone’s Consumer Confidence data, which adds more pressure on the Euro.

Impact of Economic Policies

The EU’s actions are likely to strengthen the Yen as traders seek safer investments amid economic worries for the Eurozone. At the same time, Japan’s new Prime Minister is planning a stimulus package that could surpass last year’s $92 billion, which might also influence the Yen’s value. Economists predict that around 60% expect the Bank of Japan to raise rates by 25 basis points this quarter. By March, about 96% expect at least a 25 bps increase in borrowing costs, indicating upward trends in rates. The Yen’s value hinges on Japan’s economy, the Bank of Japan’s (BoJ) policies, bond yield differences, and overall market sentiment. The BoJ’s past policies have led to the Yen’s decline, but recent adjustments are providing some support. In times of global market stress, the Yen remains a go-to safe-haven currency. As of today, October 23rd, 2025, the Euro is weakening due to the new sanctions on Russia. This geopolitical tension is driving traders to safer assets and benefiting the Japanese Yen. We’re closely monitoring the Eurozone Consumer Confidence data due later today for signs of further economic slowdown.

Market Sentiment and Strategies

The economic outlook for the Eurozone seems tough, creating headwinds for the Euro. Recent data shows Q3 GDP growth at just 0.1%, while September’s inflation remains high at 3.5%, indicating potential stagflation. These factors contribute to a bearish outlook for the Euro in the coming weeks. In Japan, the decisions from the Bank of Japan will be crucial. After ending its extremely loose monetary policy in 2024, expectations are rising for a rate hike this quarter, which would strengthen the Yen further. Minutes from the BoJ’s September meeting, released last week, showed a growing hawkish sentiment among board members focused on tackling inflation. However, we must also keep in mind the new government’s fiscal plans. Prime Minister Takaichi’s proposed stimulus package may conflict with the central bank’s tightening approach. Japanese 10-year bond yields are already rising to 1.15%, as the market reacts to the possibility of increased government spending and debt. For derivative traders, this environment suggests that buying put options on EUR/JPY could be a smart strategy. This allows traders to take advantage of potential downturns in the currency pair, while limiting losses if Japan’s stimulus unexpectedly weakens the Yen. Given the clear downward trend, this provides a controlled way to capitalize on the ongoing market tension. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now