• Eurozone investor sentiment improves sharply in January, without triggering a significant reaction in the market.
• The Japanese Yen weakens after reports about possible snap elections in Japan, reviving political uncertainty.
• Monetary policy remains a key factor, with stable expectations from the ECB and persistent uncertainty around the BoJ.

EUR/JPY trades around 184.40 on Monday at the time of writing, up 0.40% on the day, supported by a combination of macroeconomic factors favorable to the Euro (EUR) and negative for the Japanese Yen (JPY).

The release of the Sentix Investor Confidence Index for the Eurozone shows a clear improvement in January, rising to -1.8 from -6.2 in December. This marked rebound reflects renewed optimism about the region’s economic outlook, even though the immediate impact on the Euro remains limited.

On the Japanese side, the JPY weakens after media reports suggest that Prime Minister Sanae Takaichi may consider dissolving the House of Representatives as early as late January and calling snap general elections in February.

According to sources cited by Kyodo News and the Yomiuri newspaper, this possibility caught markets by surprise, reviving concerns about a new phase of political uncertainty in Japan. Such uncertainty tends to weigh on the Japanese Yen, which is particularly sensitive to periods of instability.

In addition to political factors, persistent uncertainty surrounds the outlook for Japanese monetary policy. Bank of Japan (BoJ) Governor Kazuo Ueda recently reiterated that the central bank would continue to raise interest rates if economic activity and prices evolve in line with its forecasts. While this stance keeps the door open to further tightening, the lack of clarity on the timing limits potential support for the JPY.

In this context, the balance of forces remains favorable for EUR/JPY, as the Japanese Yen weakness more than offsets the absence of a strong bullish catalyst on the Euro side.