The Euro extended its gains against the Japanese Yen for a second consecutive day, with the EUR/JPY pair trading around 185.70 during early European hours on Thursday. This upward momentum was fueled by Germany's seasonally-adjusted trade surplus, which widened to €19.1 billion in May—the largest surplus since February. This figure significantly exceeded market expectations of €14.8 billion and followed an upwardly revised €14.7 billion surplus in April. The expansion was driven by a 0.9% month-on-month increase in German exports, reaching a three-and-a-half-year high and defying forecasts of a 0.3% decline. In contrast, imports fell by 2.5% to a three-month low, missing the estimate for a 0.1% growth and reversing the previous month's 1.1% gain [1].
Despite the positive data for the Euro, the upside for EUR/JPY may be capped due to speculation that Japanese authorities could intervene in the foreign exchange market. Michael Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management, commented that the yen's current weakness is excessive and does not reflect Japan's strong economic fundamentals. He warned that this misalignment could prompt major central banks to consider coordinated intervention [1].
The Bank of Japan's latest quarterly report maintained its overall assessment, describing most of its nine regional economies as 'recovering moderately.' The report noted that many firms, including smaller enterprises, implemented substantial wage hikes this year, although some businesses expressed concerns about the sustainability of these increases. Additionally, companies are continuing to raise prices to offset higher labor and distribution costs, with several regions indicating that further price hikes for food and daily essentials are being considered for the summer [1].
CONCLUSION
Germany's stronger-than-expected trade surplus has provided support for the Euro against the Japanese Yen, but potential intervention by Japanese authorities could limit further gains. Market participants are closely watching both German export performance and possible central bank actions, which may influence the EUR/JPY trajectory in the near term.