Euro-Yen Near Multi-Month Lows as Tokyo CPI Lifts JPY

Key Moments

EUR/JPY Steadies After Setting Fresh Multi-Month Low

The Euro (EUR) is trading broadly under pressure against the Japanese Yen (JPY), hovering near 177.60 during the Asian session on Friday. The cross is stabilizing close to a fresh more than 10-month low at 176.66, which was recorded the previous day.

The Yen is broadly firmer on Friday, helped by stronger-than-expected inflation data from Tokyo that is reinforcing market expectations for additional interest rate hikes by the Bank of Japan (BoJ) in the near term.

JPY Supported by Hotter Tokyo Inflation and BoJ Signals

Tokyo Consumer Price Index (CPI) excluding fresh food rose 2.7% Year-on-Year (YoY), beating the 2.4% market estimate and accelerating from the prior 1.8% reading. Headline inflation in Tokyo also increased to 2.7%, up from 1.9% in August.

The latest BoJ Summary of Opinions from the September policy meeting, released on Thursday, indicated that several policymakers were in favor of further tightening in monetary conditions. The summary noted that “focus must be on anchoring underlying inflation near 2%”.

Japanese Yen Performance vs Major Currencies

The Japanese Yen was the strongest against the US Dollar in today’s trading. The table below summarizes the percentage performance of JPY versus major currencies mentioned.

The referenced heat map measures percentage changes of major currencies against each other, with the base currency drawn from the left column and the quote currency from the top row. For example, selecting the Japanese Yen as base and the US Dollar as quote shows the percentage change for JPY/USD in the corresponding cell.

Euro Faces Headwinds from Rising French Yields and Fiscal Concerns

The Euro is expected to remain cautious as French government bond yields surge amid concerns about accelerating public debt. According to a report from Associated Press (AP), France’s public debt has reached 119% of Gross Domestic Product (GDP), pushing the country’s 10-year bond yield to 4.96%. This is described as the highest level since August 2002.

In response, France’s Finance Minister Roland Lescure has pledged to restore public finances to a more sustainable path and pursue budget consolidation. Reuters reported that the government aims to cut the budget deficit from a projected 5% of economic output next year to the European Union’s 3% threshold by 2029.

Market Focus Turns to Eurozone HICP Release

On the data calendar, investors are awaiting the release of the Eurozone preliminary Harmonized Index of Consumer Prices (HICP) for September. The figures are scheduled to be published at 09:00 GMT and are expected to be a key input for Euro sentiment.

Tokyo CPI ex Fresh Food – Indicator Details

The Tokyo Consumer Price Index (CPI) excluding fresh food is published monthly by the Statistics Bureau of Japan. It tracks price changes for a basket of goods and services purchased by households in the Tokyo area, excluding fresh food items whose prices tend to be volatile due to weather conditions. Because it is released several weeks ahead of the nationwide CPI report, the Tokyo index is widely regarded as a leading gauge of Japan’s broader inflation trends.

The Year-on-Year reading compares prices in the reference month with those in the same month a year earlier. In general, higher readings are interpreted as supportive for the Japanese Yen, while lower readings are seen as negative for the currency.