• EUR/JPY trades without clear direction despite the European Central Bank’s cautious but confident tone.
• Investors continue to price in the prospect of a Bank of Japan rate hike, supported by persistent inflation pressures.
• Markets await next week’s BoJ policy meeting, which could confirm a decisive shift in the global interest-rate landscape.

EUR/JPY trades around 182.40 on Thursday, unchanged on the day at the time of writing, as the fundamental backdrop remains balanced between stabilization in Europe and gradually rising tightening expectations in Japan. The pair evolves in an environment where neither currency is able to gain a decisive advantage.

On the European side, European Central Bank (ECB) President Christine Lagarde reaffirmed on Wednesday at the Financial Times Global Boardroom Conference that the current monetary policy stance remains “in a good position” to guide inflation back to target. She also suggested that growth forecasts could be revised higher again, reinforcing the idea that the easing cycle is now over.

Other policymakers, including Francois Villeroy de Galhau and Gediminas Simkus, echoed this stance, noting that there is no urgency to adjust rates further, as the current policy level is considered appropriate. In this context, a prolonged policy pause may continue to support the Euro (EUR), although the absence of major data releases in the Eurozone on Thursday limits immediate catalysts.

In contrast, the Japanese Yen (JPY) retains a potentially supportive profile as markets increasingly price in a Bank of Japan (BoJ) rate hike. BoJ Governor Kazuo Ueda stated earlier this week that the likelihood of the central bank’s baseline outlook being achieved has been gradually increasing, reinforcing expectations of a slow but steady normalization. Moreover, Wednesday’s Corporate Goods Price Index showed that corporate inflation remains above historical levels, strengthening the case for additional tightening.

Concerns surrounding Japan’s fiscal trajectory also persist, as increased government spending under Prime Minister Sanae Takaichi raises questions about long-term public-finance sustainability. Even so, investors prefer to wait before taking more directional positions, with a crucial BoJ policy decision scheduled for next Friday. Markets are now pricing the possibility of a rate hike as early as next week.