EUR/JPY holds steady as Eurozone confidence meets hawkish BoJ stance

• EUR/JPY trades around 183.25 on Thursday, virtually unchanged despite solid Eurozone confidence indicators.
• The Japanese Yen benefits from a more hawkish BoJ tone and growing concerns about potential Japanese authorities’ intervention.
• More cautious signals from European Central Bank officials limit the Euro’s upside potential.

EUR/JPY trades around 183.25 on Thursday at the time of writing, virtually unchanged on the day. The cross struggles to extend its recent upside move, as support for the Japanese Yen (JPY) from domestic factors offsets relatively favorable economic data from the Eurozone.

The Japanese Yen finds support from growing speculation that Japanese authorities could intervene to curb further currency weakness. This risk adds to the still-hawkish stance of the Bank of Japan (BoJ). Minutes from the December meeting, released on Wednesday, show that several board members believe real interest rates would remain deeply negative even if the policy rate were raised to 0.75%. Officials broadly agree that the BoJ is likely to continue tightening if economic and inflation forecasts are met, while stressing the importance of avoiding any preset path and instead making decisions on a meeting-by-meeting basis.

Rabobank, through its RaboResearch division, also notes that the Japanese Yen is supported by the recent pullback in Japanese ten-year Bond yields and the rising risk of official intervention, against a backdrop of persistent inflation pressures and widening trade deficits. The bank nonetheless warns about the fragile state of Japan’s economy and highlights potential spillovers to the US Treasury market, arguing that Japan may ultimately require external support to manage its growing financial strains.

On the European side, the Euro (EUR) draws support from better-than-expected confidence indicators in January. The Economic Sentiment Index rises to 99.4 from 97.2 in December, while Industrial and Services Confidence also improve. Consumer Confidence meets expectations, holding steady at -12.4. Despite these encouraging figures, the Euro’s upside momentum remains limited.

Recent comments from European Central Bank (ECB) officials have introduced a more cautious tone. Governing Council member Martin Kocher warned that further Euro appreciation could prompt the central bank to consider renewed rate cuts. Following these remarks, markets slightly increased expectations of a summer easing move. The ECB, which has kept interest rates unchanged since June 2025 as inflation hovers around its 2% target, is widely expected to maintain a steady policy stance at next week’s meeting.

In the near term, investors’ attention also turns to Japanese inflation data. The Tokyo Consumer Price Index, due later on Thursday, will be closely watched to confirm whether inflationary pressures remain persistent. After inflation slowed to 2% YoY in December from 2.7% previously, a further moderation in January could renew downside pressure on the Japanese Yen and offer temporary support to EUR/JPY.