EUR/JPY softens to near 180.00 on intervention fears

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The EUR/JPY cross loses ground to near 180.00 during the early European session on Wednesday. The Japanese Yen (JPY) strengthens against the Euro (EUR) amid speculations that Japanese authorities would step into the market to stem further weakness in the domestic currency.

EUR/JPY edges lower to around 180.00 in Wednesday’s early European session.
Verbal intervention from Japanese authorities underpins the Japanese Yen.
Traders expect the ECB to adopt a cautious stance and anticipate that the rate-cutting cycle will end.

Japan’s Finance Minister Katayama is "alarmed" over the foreign exchange moves. Katayama emphasized that it is important for exchange rates to move in a stable manner consistent with fundamentals, adding that the government is watching markets closely as it finalizes its fiscal stance. Intervention fears might support the JPY against the EUR in the near term.

The Bank of Japan (BoJ) Governor Kazuo Ueda told Prime Minister Sanae Takaichi that the central bank is in the process of slowly dialing back its easing support for the economy, signaling his unshaken intention to carefully raise interest rates. Ueda added that the BOJ will make appropriate policy decisions based on data.

While Ueda hinted at the chance of raising interest rates, Japanese Prime Minister Takaichi has voiced displeasure over the idea and urged the Japanese central bank to cooperate with government efforts to reflate the economy. Takaichi urged the BoJ to maintain low interest rates, emphasizing that monetary policy should support both robust economic growth and stable price increases. Uncertainty surrounding BoJ rate hikes could weigh on the Japanese Yen (JPY) and act as a tailwind for the cross.

On the Euro’s front, the European Central Bank (ECB) has kept its key interest rates unchanged since June 2025, with traders expecting this pause to last into the next year. The cautious stance of the ECB could provide some support to the EUR. According to a Reuters report from September 2025, analysts anticipate that the ECB's rate-cutting cycle will end amid a stable economic outlook.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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