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EUR/JPY slips below 184.00 following Tokyo inflation data, German labor, CPI eyed

  • EUR/JPY weakens as the Japanese Yen strengthens after mixed Tokyo inflation data.
  • Tokyo’s headline CPI rose 1.6% YoY in February, up from 1.5% previously.
  • Traders await Germany’s labor and CPI figures later in the session.

EUR/JPY continues to lose ground for the second successive session, trading around 183.80 during the Asian hours on Friday. The currency cross weakens as the Japanese Yen (JPY) strengthens following Tokyo’s mixed inflation data.

Tokyo’s headline CPI rose 1.6% year-over-year (YoY) in February, up from 1.5% previously. CPI excluding fresh food increased 1.8% YoY, beating the 1.7% forecast but down from 2.0%. Meanwhile, CPI excluding fresh food and energy eased to 1.8% YoY from 2.0%.

Tokyo core inflation slipped below the Bank of Japan’s (BoJ) 2% target for the first time since 2024. Still, price growth remains elevated by historical standards, and recent hawkish remarks from policymakers continue to support expectations of further policy tightening.

Tokyo’s headline CPI rose 1.6% YoY in February, up from 1.5% previously. CPI excluding fresh food increased 1.8% YoY, beating the 1.7% forecast but down from 2.0%. Meanwhile, CPI excluding fresh food and energy eased to 1.8% YoY from 2.0%.

BoJ Governor Kazuo Ueda reiterated that rates will continue to rise if economic and price projections materialize. Board Member Hajime Takata added that further hikes should proceed gradually.

Markets now turn to Germany’s labor market data, including Unemployment Change and the Unemployment Rate, ahead of the release of German CPI figures later in the session.

German economy FAQs

The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany's economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany's economy strengthens, it can bolster the Euro's value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro's strength and perception in global markets.

Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the 'Fiscal Compact' following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.

Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.

German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond's price, and it is therefore considered a more accurate reflection of return. A decline in the bund's price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.

The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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