EUR/JPY steady as ECB minutes support Euro, Yen pressured by fiscal concerns

EUR/JPY trades around 181.25 on Thursday at the time of writing, as the market digests a mild boost for the Euro (EUR) from the latest European Central Bank (ECB) Accounts alongside a still-challenging backdrop for the Japanese Yen (JPY).

The ECB Accounts revealed unanimous agreement within the Governing Council to leave all three key interest rates unchanged in October, with policymakers describing the current monetary stance as “in a good place”.

The minutes confirmed that inflation is gradually converging toward the 2% target, while domestic demand and labour-market conditions remain resilient. However, the discussion also highlighted “two-sided” risks to inflation. Some members believe the easing cycle has likely ended, while others do not rule out further rate cuts in 2026 should downside risks intensify.

On the data front, sentiment indicators published earlier in the day painted a mixed but stable picture. The Economic Sentiment Indicator came in at 97 in November, in line with expectations, while Consumer Confidence remained unchanged at -14.2.

In Japan, the Japanese Yen (JPY) remains structurally pressured as fiscal concerns deepen and speculation persists around the timing of the Bank of Japan’s (BoJ) next rate increase. Prime Minister Sanae Takaichi’s pro-stimulus stance has amplified worries over Japan’s public-debt trajectory, weighing further on the JPY despite a constructive risk-tone globally.

Markets also remain alert to the risk of intervention. Finance Minister Satsuki Katayama issued his strongest warning so far, saying the government would take “appropriate action” in case of excessive volatility. Takuji Aida, a member of an influential government panel, also raised the possibility of intervention to counter the economic fallout of an excessively weak currency.

On the monetary front, several recent signals reinforced the view that a December rate hike remains a live option. Reuters reported that the BoJ has intentionally adjusted its communication in recent days to emphasise the inflationary risks stemming from a persistently weak Japanese Yen.

The tone was echoed by BoJ board member Asahi Noguchi, who reiterated that if economic activity and prices evolve as forecast, the central bank will gradually adjust the degree of accommodation to reach the neutral interest rate once inflation is durably anchored at 2%.

Recent data supports this trajectory as well. Japan’s Services Producer Price Index rose 2.7% in October from a year earlier, underscoring that inflation is approaching a durable 2% pace. Meanwhile, the government’s approval of a massive ¥21.3 trillion stimulus plan, the largest since the COVID era, has intensified concerns about rising debt issuance and contributed to further yield-curve steepening, limiting the Japanese Yen’s ability to recover.

Against this backdrop, EUR/JPY remains caught between mild Euro support, driven by the ECB’s steady monetary posture, and a structurally fragile Japanese Yen, partly cushioned by intervention risks and expectations of BoJ tightening.