• EUR/JPY trades in negative territory for a second consecutive day, supported by a firmer Japanese Yen.
• Tokyo inflation prints mixed figures in February, with broader core measures slowing.
• German inflation came in below expectations in February.

EUR/JPY trades around 184.00 on Friday at the time of writing, down 0.10% on the day, marking a second straight decline. The cross is pressured by a strengthening Japanese Yen (JPY) following the release of mixed inflation data from Tokyo.

Tokyo’s Consumer Price Index (CPI) rose 1.6% YoY in February, compared with 1.5% previously. The index excluding fresh food increased 1.8% YoY, above expectations of 1.7%, but down from 2% in the prior month. This gauge therefore falls below the Bank of Japan (BoJ) 2% target for the first time since 2024. Meanwhile, the measure excluding both fresh food and energy slowed to 1.8% YoY from 2%.

Despite the partial slowdown, price pressures remain elevated by historical standards, sustaining expectations of gradual monetary tightening. BoJ Governor Kazuo Ueda reiterated that interest rates will continue to rise if economic and inflation projections materialize. Board member Hajime Takata also stressed that further hikes should proceed gradually. These remarks maintain a supportive backdrop for the Japanese Yen and limit the pair’s rebound potential.

On the European side, the German's Consumer Price Index rose 0.2% MoM, below the 0.5% expected and slightly above the previous 0.1% increase. On a yearly basis, the CPI slowed to 1.9%, missing expectations of 2% and down from 2.1% previously.

The Harmonized Index of Consumer Prices (HICP), the European Central Bank’s (ECB) preferred gauge, increased 0.4% MoM, below the 0.5% forecast but rebounding from -0.1% in January. On an annual basis, the HICP eased to 2%, compared with 2.1% previously and below expectations of 2.1%.

The softer-than-expected inflation readings may strengthen expectations of further monetary easing by the ECB, potentially weighing on the Euro (EUR). However, ECB President Christine Lagarde recently told the European Parliament’s Committee on Economic and Monetary Affairs that inflation is on track to stabilize around the 2% target over the medium term. She reiterates that interest rate decisions will remain data-dependent and taken on a meeting-by-meeting basis.

In this context, the short-term direction of EUR/JPY largely depends on the expected monetary policy divergence between the BoJ and the ECB, as well as on overall market risk sentiment.

(This story was corrected on February 27 at 13:46 GMT to say that the index excluding fresh food falls below the Bank of Japan (BoJ) 2% target for the first time since 2024, not the broader gauge.)