Insights 
VT 
The EUR/JPY fell below 1.1600 to around 1.1590 in Asian trading on Thursday. This shift occurred as the Euro weakened against the Japanese Yen following the European Union’s new sanctions on Russia in response to the ongoing conflict in Ukraine.
The sanctions were introduced by the EU and the US, citing Russia’s alleged insincerity in resolving the conflict. In the backdrop, Eurozone Consumer Confidence data is awaited, adding economic pressure to the Euro.
Impact of Economic Policies
The EU’s decision is expected to bolster the Yen as traders look for safer assets, anticipating economic challenges for the Eurozone. Concurrently, Japan’s new Prime Minister is readying an economic stimulus package to exceed last year’s $92 billion, potentially affecting the Yen’s value.
Economists project that nearly 60% expect the Bank of Japan to raise rates by 25 basis points within this quarter. By March, around 96% foresee at least a 25 bps increase in borrowing costs, underscoring rising rates.
The Yen’s value depends on Japan’s economy, BoJ policy, bond yield differentials, and risk sentiment. BoJ’s past monetary stance caused the Yen’s depreciation, but recent changes are offering some support. Amid global market stress, the Yen remains a preferred safe-haven currency.
As of today, October 23rd, 2025, we see the Euro weakening due to new sanctions on Russia. This geopolitical tension is pushing traders towards safe-haven assets, which is benefiting the Japanese Yen. We are closely watching the Eurozone Consumer Confidence data due later today for signs of further economic slowing.
Market Sentiment and Strategies
The economic outlook for the Eurozone appears challenging, creating a headwind for the Euro. Recent data showed that Q3 GDP growth was a sluggish 0.1%, while inflation for September remained stubbornly high at 3.5%, suggesting stagflationary pressures are building. These conditions support a bearish view on the single currency in the coming weeks.
In Japan, the Bank of Japan’s path is the main driver. After ending its ultra-loose policy in 2024, expectations are firming for a rate hike this quarter, which would further strengthen the Yen. The minutes from the BoJ’s September meeting, released last week, revealed a hawkish consensus building among board members to address inflation.
However, we must also consider the new government’s fiscal plans. Prime Minister Takaichi’s proposed stimulus package creates a conflict with the central bank’s tightening policy. We are already seeing Japanese 10-year bond yields rise to 1.15% as the market digests the possibility of increased government spending and debt.
For derivative traders, this environment suggests buying put options on EUR/JPY could be a prudent strategy. This allows for exposure to further downside in the currency pair while limiting potential losses if the massive Japanese stimulus suddenly weakens the Yen. Given the clear downward trend, this offers a defined-risk approach to capitalizing on the ongoing market stress.
