• EURJPY edges lower as the Yen strengthens on rising BoJ rate hike expectations.
• Japan’s 10-year bond yield jumps to a 17-year high as markets price in a possible December rate hike.
• Eurozone Retail Sales remain soft, offering limited support for the Euro.

The Euro (EUR) weakens against the Japanese Yen (JPY) on Thursday as the Yen outperforms major peers, buoyed by growing speculation that the Bank of Japan (BoJ) could raise interest rates at its upcoming December 19 monetary policy meeting. At the time of writing, EUR/JPY is trading near 180.64, down nearly 0.25% on the day.

After several weeks of uncertainty about whether the BoJ would lift rates, partly due to fiscal concerns under new Prime Minister Sanae Takaichi, sentiment has begun to shift. Hawkish comments from BoJ Governor Kazuo Ueda earlier this week revived the prospect of a rate increase. Ueda said officials will actively weigh the pros and cons of tightening at the December meeting.

Recent inflation figures also support the case for policy tightening. Data from the Statistics Bureau of Japan showed that Tokyo’s headline Consumer Price Index rose 2.7% YoY in November, matching expectations and easing slightly from 2.8% in October. Measures that exclude food or both food and energy held steady at 2.8%, coming in above forecasts.

A Reuters report published on Thursday said the BoJ is likely to raise rates in December, with the government expected to tolerate such a move, according to three officials familiar with the discussions.

Rising interest rate expectations are also showing up in Japan’s bond market. The 10-year government bond yield climbed above 1.9% on Thursday, its highest level since 2007.

On the Euro side, the latest retail sales figures offered little support for the currency. Eurozone Retail Sales were flat at 0% MoM in October, missing expectations for a 0.1% increase. On a yearly basis, sales rose 1.5%, slightly above the 1.4% forecast and higher than the 1.2% increase recorded in October.

ECB policymaker Piero Cipollone said on Thursday that the Eurozone economy has been resilient, although many risks remain in the pipeline. He noted that inflation risks now appear more balanced and said the ECB stands ready to react to any shock. Cipollone added that the ECB is taking decisions meeting by meeting.