Insights 
VT 
European Central Bank Policies
Japan reports Labour Cash Earnings growth of 1.5% in August, down from 4.1% in July, and below the 2.6% forecast. In real terms, wages declined by 1.4%, marking an eighth consecutive monthly fall, reducing expectations for a BoJ rate hike.
Sanae Takaichi’s win as leader of Japan’s ruling party positions her to become the next Prime Minister, with her pro-stimulus stance suggesting a continued accommodative BoJ policy.
The EUR/JPY stabilisation is due to Japan’s anticipated dovish policy and France’s political stability, though profit-taking limits upward momentum. Euro’s performance is varied against major currencies, strongest against the New Zealand Dollar.
Trading Strategies and Market Opportunities
We are looking back at a period when EUR/JPY was consolidating near a record high of 177, driven by a dovish Bank of Japan and easing political concerns in France. This setup created a powerful tailwind for the pair, rewarding anyone who was long. The fundamental story was simple: a central bank in Japan that couldn’t hike versus a relatively stable outlook in Europe.
The outlook for a weak yen that we saw then has largely materialized over the past year. Japan’s Q3 2025 wage growth figures, coming in at a tepid 1.8%, confirm that the Bank of Japan has had little room to aggressively tighten policy. The BoJ’s policy rate has only moved to 0.1%, maintaining the yen’s position as a funding currency for carry trades.
