• EUR/JPY trades slightly lower as investors remain cautious ahead of Eurozone inflation data.
• Germany’s IFO survey beats expectations but fails to trigger meaningful buying interest in the Euro.
• Softer Japan inflation tempers tightening expectations, although the prospect of a rate hike in April remains on the table.

EUR/JPY trades around 182.50 on Monday at the time of writing, down 0.15% on the day, as market participants adopt a wait-and-see approach ahead of key macroeconomic releases in Europe and Japan.

The release of Germany’s IFO Business Climate Index generated only a limited market reaction. The headline index rose to 88.6 in February, above expectations of 88.4 and up from 87.6 in January. In detail, the Current Assessment Index improved to 86.7 from 85.7, while the Expectations Index printed at 90.5, in line with forecasts. Despite this improvement, the Euro (EUR) receives only modest support, as traders prefer to await Eurozone inflation figures and Germany’s fourth-quarter Gross Domestic Product (GDP) data, both due on Wednesday.

Markets expect Eurozone Core Harmonized Index of Consumer Prices (HICP) inflation to ease to 2.2% YoY in January from 2.3% in December, while the headline HICP is seen holding steady at 1.7%. These figures are likely to be crucial in shaping expectations regarding the European Central Bank’s (ECB) policy path, with the market consensus pointing to an extended period of unchanged rates this year.

On the Japanese side, the Japanese Yen (JPY) remains firm after National Consumer Price Index (CPI) data showed a 1.5% annual increase in January, down from 2.1% in December. Core measures also softened, prompting caution over the timing of further tightening by the Bank of Japan (BoJ). However, several analysts argue that the broader normalization process remains intact.

Economists at MUFG highlight that the sharp rise in super-long Japanese government bond yields in January attracted strong foreign demand, helping stabilize the bond market and the Japanese Yen (JPY). According to the bank economists, swift approval of the fiscal year 2026 budget would increase the chance of a rate hike at the April 28 meeting, an outcome currently priced at around 70% by markets.

In this context, EUR/JPY remains sensitive to shifts in interest rate differentials between the Eurozone and Japan. Confirmation of softer European inflation could weigh on the Euro (EUR), while firmer signals from the Bank of Japan in favor of a rate hike would support the Japanese Yen.