- EUR/JPY could gain ground on growing speculation that the BoJ will raise negative rates.
- Japan's GDP rose 0.1% quarter-on-quarter in the fourth quarter of 2023, down from a previous decline of 0.1%.
- Traders will be attentive to Christine Lagarde's statements during Monday's Eurogroup meeting.
EUR/JPY recovers its intraday losses, while the Japanese Yen strengthens after Japan's Gross Domestic Product (GDP) data shows that the Japanese economy returned to growth in the last quarter of 2023, thus moving away from a recession technique. The pair attempts to rebound from the weekly lows and trades around 160.60 during the early hours of the European session on Monday.
Japan's quarter-on-quarter GDP grew 0.1% in the fourth quarter of 2023, reversing the previous decline of 0.1%, but falling short of the forecast growth of 0.3%. Meanwhile, the annualized GDP figure showed a growth reading of 0.4%, below the market expectation of 1.1% and the previous decline of 0.4%. Consequently, the 2-year Japanese government bond yield shot up towards 0.20%, marking the highest level since 2011. Furthermore, the 10-year government bond yield rose to around 0.75%.
These GDP figures have reinforced speculation that the Bank of Japan (BoJ) could begin raising interest rates soon. BoJ policymakers are apparently leaning toward ending negative interest rates this month, buoyed by expectations of substantial wage hikes in the year's annual wage negotiations.
Last week, BoJ Governor Kazuo Ueda stated that it is “entirely possible to seek an exit from stimulus while striving to achieve the 2% inflation target.” In addition, Junko Nakagawa, a member of the BoJ council, recently commented that “the prospects for the economy to reach a positive cycle of inflation and wages are in sight.”
On the other hand, the European Central Bank (ECB) maintained financing costs at record levels last week, in line with expectations. ECB President Christine Lagarde took a cautious stance, stressing the need for more evidence before considering rate cuts. Market participants will closely follow Lagarde's statements during the Eurogroup meeting scheduled for Monday. Additionally, Tuesday's German Consumer Price Index (CPI) data is likely to attract investors' attention.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
