The Euro (EUR) advanced against the Japanese Yen (JPY) on Thursday, with the EUR/JPY pair trading higher around 180.55, marking a 0.19% gain on the day at the time of writing [1]. This upward movement was primarily supported by stronger-than-expected German business sentiment data, as Germany’s IFO Business Climate Index rose to 89.9 in September from 88.8 in August, surpassing the market consensus of 89. The Current Assessment Index also improved to 89.5 from 88.5, and the Expectations Index climbed to 90.4 from 89, reaching its highest level since February [1].
On the Japanese side, uncertainty regarding the pace of further monetary tightening by the Bank of Japan (BoJ) limited the Yen’s ability to strengthen. The BoJ recently raised its policy rate by 25 basis points to 1.25%, the highest since 1995, but the 7-2 vote revealed divisions within the central bank, with board members Toichiro Asada and Ayano Sato dissenting. This disagreement has raised uncertainty over the pace of additional tightening, and BoJ Governor Kazuo Ueda’s comments after the decision did not meet increasingly hawkish market expectations [1].
Despite Japanese government bond yields rising, with the 10-year JGB yield up nearly 9 basis points to 3.071%—its highest level in 30 years—markets currently assign only about a 30% chance to another rate increase in October, which would take the benchmark short-term rate to 1.5%, according to Bloomberg. The relatively limited expectations for an imminent follow-up hike have prevented rising Japanese yields from translating into a stronger Yen, allowing EUR/JPY to remain supported above 180.50 [1].
In terms of currency performance, the Euro was the strongest against the Japanese Yen among major currencies today, as shown in the provided percentage change table [1].
CONCLUSION
Stronger-than-expected German IFO data and uncertainty over the BoJ’s monetary tightening path have supported the Euro against the Yen. Despite rising Japanese yields, limited expectations for further BoJ rate hikes have kept the Yen under pressure. The market impact is medium, with EUR/JPY maintaining gains above 180.50.