EUR/JPY traded near 184.60 on Wednesday, up 0.58% on the day, as the Japanese Yen weakened. The move followed uncertainty over how quickly Japan may normalise monetary policy.
Local media reported that Prime Minister Sanae Takaichi raised concerns about further rate rises in a meeting last week with Bank of Japan Governor Kazuo Ueda. Ueda said the discussion covered general economic and financial conditions, with no specific policy requests.
BoJ Policy Signals And Yen Weakness
Reports of board nominees seen as leaning towards looser policy added to expectations that normalisation may stay gradual. This led market pricing to shift away from further near-term rate rises in Japan, which weighed on the Yen.
In the Euro area, the Euro held firmer after European Central Bank President Christine Lagarde said inflation and the current rate stance are in a good place. She said policy decisions would be made meeting by meeting, based on incoming data.
German data were mixed, with the GfK Consumer Confidence index for March falling to -24.7 from a revised -24.2 in February, below the -23.5 forecast. Germany’s fourth-quarter GDP was confirmed at 0.3% quarter-on-quarter and 0.4% year-on-year.
Eurozone January HICP was revised to -0.6% month-on-month from -0.5%, with the annual rate confirmed at 1.7%. Core HICP was confirmed at -1.1% month-on-month and 2.2% year-on-year.
EURJPY Outlook And Trade Positioning
Given the Bank of Japan’s perceived hesitation to tighten policy, the path of least resistance for the Japanese Yen appears to be further weakness. This environment supports the EUR/JPY cross, which is currently testing the 184.60 level. Traders should consider strategies that benefit from a continued, gradual climb in the pair over the coming weeks.
We see this dovish stance from the BoJ despite recent data showing Japan’s national core CPI for January holding at 2.0%, staying above the bank’s target for a prolonged period. This reinforces the view that political concerns are outweighing economic data, making long EUR/JPY positions attractive. The market’s focus is now squarely on the outcome of the spring wage negotiations to see if it can force a policy shift.
Looking back, we saw how the popular carry trade, borrowing in cheap Yen to fund investments in higher-yielding currencies, dominated markets through much of 2025. The current policy divergence between a patient ECB and a reluctant BoJ suggests this theme will persist. This makes holding positions that profit from this interest rate differential a sound underlying strategy.
On the other side of the cross, the Euro is holding steady as the ECB remains in a wait-and-see mode. Recent flash estimates for February showed Eurozone inflation at 2.6%, suggesting that disinflation is not rapid enough to force imminent rate cuts. This relative stability in ECB policy makes the Euro a solid vehicle to express a bearish view on the Yen.
For derivative traders, this outlook makes buying EUR/JPY call options an appealing strategy. This allows for participation in potential upside gains driven by Yen weakness while strictly defining the maximum risk to the premium paid. Out-of-the-money calls with expirations in one to two months could offer a cost-effective way to position for a continued move higher.
To manage the risk of a surprise policy shift or verbal intervention from Japanese officials, which we saw cause sharp reversals last year in 2025, hedging is prudent. Buying cheap, far out-of-the-money EUR/JPY put options could protect against a sudden drop in the pair. This provides a safety net in what remains a politically sensitive trade.
