Key Moments
- EUR/JPY trades near 183.80 in early European dealings on Monday, with selling pressure emerging below 184.00.
- The BoJ Summary of Opinions from the December meeting reinforces expectations of additional tightening, supporting the Yen.
- Market pricing for a 25 bps ECB rate cut in February 2026 remains below 10%, signaling that the easing cycle may be ending soon.
EUR/JPY Under Pressure in Early European Trade
The EUR/JPY pair retreated to around 183.80 during Monday’s early European session. Sellers stepped in as the pair slipped below the 184.00 handle. This move reflects renewed strength in the Japanese Yen (JPY) against the Euro (EUR). It follows the Bank of Japan’s (BoJ) December Summary of Opinions, which boosted expectations of continued policy tightening in 2026.
BoJ Outlook Supports Yen as Policymakers Discuss Further Hikes
At its December meeting, the BoJ lifted its policy rate to 0.75% from 0.50%. The Summary of Opinions, released Monday, shows some board members see room for additional rate hikes soon. This stance strengthens the Yen and weighs on the EUR/JPY cross.
The summary also noted that a weaker JPY and higher long-term yields were partly due to the BoJ’s policy rate being low relative to inflation. Therefore, markets now expect the central bank to continue normalizing policy, further supporting the Yen.
| Event/Metric | Detail |
|---|---|
| EUR/JPY level (early European session, Monday) | Around 183.80 |
| BoJ policy rate (December meeting) | 0.75% (up from 0.50%) |
| ECB rate cut priced by money markets | 25 bps in February 2026, probability below 10% |
ECB Holds Rates, Signals Data-Dependent Approach
On the Euro side, the ECB kept interest rates unchanged earlier this month. It signaled that rates will likely remain steady for some time. ECB President Christine Lagarde emphasized that forward guidance is limited due to uncertainty. Instead, the bank follows a data-driven, meeting-by-meeting approach.
Money markets currently price a 25 bps ECB rate cut in February 2026, with probability below 10%. These signals suggest the rate-cut cycle is nearing its end. This could help cushion the Euro and limit downside in EUR/JPY, even as BoJ tightening favors the Yen.
Japanese Yen FAQs
What key factors drive the Japanese Yen?
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value depends on Japan’s economic performance, the BoJ’s policy, the differential between Japanese and US bond yields, and risk sentiment among traders.
How do Bank of Japan decisions impact the Yen?
The BoJ influences the Yen directly. Occasionally, it intervenes to lower the Yen’s value, though this is rare due to political considerations. Between 2013 and 2024, the BoJ’s ultra-loose policy caused depreciation against major currencies. Recently, unwinding this policy has provided some support to the Yen.
How does the US-Japan bond yield differential impact the Yen?
The BoJ’s ultra-loose stance widened the gap between 10-year US and Japanese bonds, favoring the US Dollar. Gradual policy normalization in Japan, alongside rate cuts elsewhere, is now narrowing this differential and helping the Yen.
How does broader risk sentiment impact the Yen?
The Yen is seen as a safe-haven currency. During market stress, investors prefer the Yen over riskier currencies. Consequently, turbulent times tend to strengthen the Yen.
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