EUR/JPY falls to near 170.00 as BoJ Meeting Minutes signal potential for rate hikes

EUR/JPY remains subdued for the third successive session, trading around 170.20 during the Asian hours on Tuesday. The currency cross continues to face challenges as the Japanese Yen (JPY) receives support after minutes from the Bank of Japan’s (BoJ) June meeting indicated that many members expect the central bank to continue raising the policy rate if the economy, prices move in line with its forecast.

The Bank of Japan (BoJ) board members said inflation is somewhat overshooting the forecast, but must scrutinize economic developments due to downside risk to growth from the United States (US) tariff policy. A few members highlighted that uncertainty remains high, but downward pressure on Japan’s economy from US tariff policy may not be as strong as projected in the Bank of Japan’s previous meeting.

Japanese Economy Minister and chief trade negotiator, Ryosei Akazawa, said on Tuesday that he will push the United States (US) to give an order to take the auto tariff into effect as soon as possible. "One of the purposes of the US visit is to confirm details of the latest tariff agreement," Akazawa added.

However, the EUR/JPY cross may further appreciate as the Euro (EUR) could receive support from the prevailing cautious sentiment surrounding the European Central Bank’s (ECB) policy outlook. Traders expect the ECB to hold rates steady as the Eurozone annual inflation held at 2.0% in July, slightly above the 1.9% forecast. Meanwhile, traders adopt caution amid the imposition of 15% US tariffs on goods imported from the European Union (EU).

Market participants will likely observe the HCOB Composite and Services Purchasing Managers’ Index (PMI) data from the Eurozone and Germany later in the day. The PMI report may offer fresh understanding of economic activity and potential future trends in the Eurozone.