The euro climbed toward 162.50 against the Japanese yen on Monday, as the Bank of Japan held interest rates steady in line with expectations, reinforcing a widening policy gap between Japan and the eurozone. The move reflected investor preference for higher-yielding currencies amid steady risk sentiment.
The BoJ’s decision to maintain its ultra-loose monetary stance came as no surprise to markets, but it underscored Japan’s ongoing divergence from its global peers. In contrast, European Central Bank officials have maintained a more hawkish tone, signaling that any easing will depend on clear disinflation progress.
This divergence has helped support the euro against the yen in recent sessions. “Rate differentials are firmly driving EUR/JPY,” said one currency strategist. “As long as the ECB remains cautious and the BoJ stays accommodative, there’s a clear incentive to rotate into euro-denominated assets.”
The yen, already under pressure from Japan’s soft inflation data and sluggish economic momentum, showed limited reaction to the policy outcome. With the BoJ offering little in the way of forward guidance, markets remain skeptical of any near-term tightening, keeping the currency on the defensive.
Meanwhile, the euro has found modest support from improving sentiment around the European economy and signs that inflation may be stabilizing. While the ECB is expected to tread carefully, its reluctance to cut prematurely keeps the euro relatively attractive in a low-volatility environment.
For now, traders will continue monitoring economic data from both regions, including eurozone inflation updates and any further signals from BoJ officials. Until Japan signals a shift in tone, EUR/JPY is likely to remain supported, driven by yield-seeking flows and steady euro demand.
