The euro strengthened against the Japanese yen on Wednesday, with the EUR/JPY pair rising above 164.00 as uncertainty grows around the Bank of Japan’s (BoJ) interest rate strategy. The BoJ has kept its short-term interest rate steady at 0.25%, hinting at potential future hikes if economic targets are met.
Recent data, including weaker service-sector sentiment and rising corporate bankruptcies in Japan, has raised doubts about the BoJ’s ability to reach its 2% inflation target. This economic fragility may delay further rate hikes, leading to yen depreciation. Meanwhile, the euro remains resilient, supported by stable economic indicators within the Eurozone.
The divergence in monetary policy expectations between the BoJ and the European Central Bank has bolstered the euro’s strength against the yen. Analysts are closely watching upcoming economic reports and BoJ statements for clarity on the bank’s next steps, with potential rate adjustments possibly delayed until early next year.
