- EUR/JPY strengthened as the BoJ’s Summary of Opinions highlighted divisions among policymakers over the timing of future interest rate hikes.
- Japanese Prime Minister Shigeru Ishiba faces a parliamentary leadership vote today, following the ruling LDP party’s loss of its majority in the lower house.
- Deutsche Bank analysts have warned that higher US tariffs could negatively affect the Eurozone export sector.
EUR/JPY rises near 164.50 during the Asian trading session on Monday, boosted by a weakening of the Japanese Yen (JPY). This move follows the release of the Bank of Japan’s (BoJ) October Summary of Opinions, which highlighted divisions among policymakers over the timing of future interest rate hikes.
Some BoJ members expressed concerns about global economic uncertainties and increasing market volatility, particularly in relation to the depreciation of the JPY. However, the central bank has indicated it could raise its benchmark policy rate to 1% by the second half of fiscal 2025.
Meanwhile, Japanese Prime Minister Shigeru Ishiba faces a parliamentary leadership vote today, after the ruling Liberal Democratic Party (LDP) lost its majority in the lower house, which it had held since 2012. According to the Associated Press, Ishiba could now seek form a new government with the support of minority parties.
In Germany, Chancellor Olaf Scholz appointed a new finance minister following the dismissal of the previous one, a move that effectively dissolves the ruling coalition. This decision has sparked calls from opposition parties and business leaders for new elections to restore stability amid growing political uncertainty.
Analysts at Deutsche Bank have warned that higher US tariffs could put pressure on the Eurozone export sector, potentially affecting economic growth and the Euro. They highlighted the high level of uncertainty around several factors, including the precise impact of the US tariffs, the timing of their implementation and how Europe will respond.
The Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of Japanese and US bonds or the risk sentiment among traders, among other factors.
One of the mandates of the Bank of Japan is currency control, so its movements are key for the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the depreciation of the Yen against its main currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s ultra-loose monetary policy stance has led to increased policy divergence with other central banks, particularly the US Federal Reserve. This favors the widening of the spread between US and Japanese 10-year bonds, which favors the Dollar against the Yen.
The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
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.
