The EUR/JPY cross decreased to around 176.60 in the Asian session on Friday. This drop was due to the Japanese Yen strengthening against the US Dollar following the Bank of Japan’s (BoJ) September policy meeting minutes and Japanese officials’ statements.
BoJ Minutes and Impact on Yen
The BoJ minutes showed that more policymakers are considering potential interest rate hikes, with some members calling for immediate action. This hawkish sentiment could strengthen the Yen further against the Euro.
Japanese officials’ verbal interventions, specifically Finance Minister Satsuki Katayama’s comment on closely monitoring foreign exchange movements, may also support the Yen. Meanwhile, the European Central Bank’s cautious approach might limit the Euro’s losses against the Yen.
ECB President Christine Lagarde stated the bank is well-positioned and committed to maintaining its favourable stance. ECB member Boris Vujcic noted satisfaction with current policies after achieving target inflation, aligning with market expectations of limited interest rate cuts by 2026.
The Japanese Yen’s value is influenced by the BoJ’s policies, bond yield differentials, and global risk sentiment. As a safe-haven currency, it often attracts investment during market stress, which can further elevate its value.
EUR/JPY Market Outlook
We are seeing EUR/JPY struggle near 176.50 as the policy gap between the Bank of Japan and the European Central Bank widens. The BoJ is clearly signaling a move towards higher rates, which is putting upward pressure on the Yen. This contrasts with a steady ECB that sees its job on inflation as mostly complete.
The hawkish sentiment from the BoJ’s September minutes is being backed by hard data, as Japan’s national Core CPI for October 2025 hit 2.9%. This marks the 18th consecutive month inflation has been above the central bank’s 2% target. Consequently, the 10-year Japanese government bond yield has risen to 1.15%, a level not seen since 2012.
Adding to the Yen’s strength is the increased verbal intervention from Japanese officials, which we should not ignore. These warnings have teeth, as we saw with direct currency market interventions in late 2022 and throughout 2024 to support the Yen. This history suggests a lower tolerance for Yen weakness and a readiness to act.
On the other side of the pair, the ECB’s cautious stance is likely to cap any significant Euro rallies. Recent flash PMI data from Germany showed a slight contraction in manufacturing, and with Eurozone inflation easing to 2.1%, the central bank has little reason to turn hawkish. The market pricing in only a minimal 25 basis point cut by late 2026 confirms this view of a prolonged pause.
Given this outlook, traders should consider strategies that benefit from a falling or range-bound EUR/JPY in the coming weeks. Buying put options could offer a direct way to profit from a move lower, protecting against downside risk. Alternatively, establishing bear put spreads would be a lower-cost strategy to capitalize on a moderate decline toward the 174.00-175.00 range.
