EUR/JPY rises to near 182.00 ahead of Eurozone Q4 GDP data
EUR/JPY halts its four-day losing streak, trading around 181.90 during the Asian hours on Friday. Traders await the preliminary reading of the Eurozone’s fourth-quarter Gross Domestic Product (GDP) due later in the day, expected at 0.3% Quarter-over-Quarter (QoQ) and 1.3% Year-over-Year (YoY).
  • EUR/JPY rebounded as the Euro gained ahead of Friday’s Eurozone fourth-quarter GDP release.
  • The currency cross rebounds from 180.81 but heads for its worst weekly loss in a year.
  • The Japanese Yen gains on expectations that PM Takaichi’s fiscal plans will boost growth without straining finances.

EUR/JPY halts its four-day losing streak, trading around 181.90 during the Asian hours on Friday. Traders await the preliminary reading of the Eurozone’s fourth-quarter Gross Domestic Product (GDP) due later in the day, expected at 0.3% Quarter-over-Quarter (QoQ) and 1.3% Year-over-Year (YoY).

The EUR/JPY cross rebounded from the prior session’s two-month low of 180.81 but remains on track for over 2% weekly loss, its worst in a year. However, the currency cross may extend its losses as the Japanese Yen (JPY) finds support from expectations that Prime Minister Sanae Takaichi’s fiscal expansion plans will spur growth without putting additional strain on public finances. Takaichi’s decisive election win eased political uncertainty and secured a mandate for higher spending and targeted tax cuts. She assured markets the two-year food sales tax cut will not require additional bond issuance, instead funded through subsidies, special tax measures, and non-tax revenues.

Japan’s Finance Minister Satsuki Katayama said on Friday that markets have stabilized following the initial reaction to plans to cut the consumption tax on food. Katayama added that Japan’s debt-to-gross domestic product ratio is projected to decline further.

BoJ board member Naoki Tamura said on Friday that even with additional policy rate hikes, monetary conditions would remain accommodative. Tamura noted the central bank is carefully assessing incoming data to ensure a smooth path toward its inflation target. While consumer inflation is stabilizing, he stressed vigilance over the price outlook amid the renewed Yen downtrend.

Japanese Yen FAQs

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.

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.

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.

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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