The EUR/JPY pair climbed above 156.50, extending its upward trend as the yen struggled against a broadly resilient euro. The move comes amid persistent yen weakness, driven by diverging monetary policy expectations between the Bank of Japan (BoJ) and the European Central Bank (ECB).
Despite the gains, upside momentum appears limited as speculation grows over a possible BoJ rate hike later this year. Investors remain cautious, weighing the likelihood of the central bank moving away from its ultra-loose monetary stance. Markets have already priced in potential adjustments, with BoJ officials hinting at policy flexibility depending on inflation and wage growth.
Meanwhile, the euro remains supported by steady ECB policy guidance. While concerns over eurozone economic growth persist, the central bank has maintained its hawkish stance, emphasizing the need to keep borrowing costs elevated for an extended period. This has helped the euro hold firm against the yen, despite broader headwinds in global risk sentiment.
The yen’s recent underperformance reflects doubts about the BoJ’s ability to tighten policy aggressively. Japan’s inflation data has shown signs of stabilization, but policymakers remain cautious about moving too quickly. A stronger yen would likely require a clear signal from the BoJ, something that remains uncertain at this stage.
Looking ahead, traders will focus on upcoming economic data from Japan and the eurozone for further direction. Any shifts in expectations around BoJ intervention or ECB policy could trigger sharp moves in EUR/JPY, particularly if central bankers provide fresh signals on the timing of their next policy steps.
