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Euro continues to underperform against Japanese Yen, ECB policy awaited

  • EUR/JPY slides to near 178.50 on the Japanese Yen’s continued outperformance.
  • The ECB and the BoJ are widely anticipated to raise interest rates in their upcoming policy meetings.
  • Financial markets see the ECB raising interest rates to 3% by H1FY2027.

The Euro (EUR) is down 0.27% to near 178.50 against the Japanese Yen (JPY) during the European trading session on Wednesday, closer to its almost 10-month low of 177.85 posted the previous day.

The cross remains under pressure due to the continued outperformance by the Japanese currency.

Japanese Yen Price This week

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.18%-0.19%-1.51%-0.42%-0.38%0.53%0.00%
EUR0.18%-0.01%-1.30%-0.23%-0.18%0.72%0.19%
GBP0.19%0.01%-1.41%-0.23%-0.18%0.73%0.20%
JPY1.51%1.30%1.41%1.19%1.21%2.11%1.58%
CAD0.42%0.23%0.23%-1.19%0.09%0.95%0.43%
AUD0.38%0.18%0.18%-1.21%-0.09%0.91%0.38%
NZD-0.53%-0.72%-0.73%-2.11%-0.95%-0.91%-0.52%
CHF-0.01%-0.19%-0.20%-1.58%-0.43%-0.38%0.52%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

The Asia-Pacific currency remains firm as market experts hope the Bank of Japan (BoJ) to continue its monetary tightening cycle despite raising interest rates in the upcoming policy meeting next week.

Yen strength underpinned as Deutsche Bank sees BoJ poised for further tightening

Analysts at Deutsche Bank argue that the latest upside surprise in Japan’s wage data “reinforces the overwhelming case for the Bank of Japan (BoJ) to raise interest rates at next week’s policy meeting, following its previous hike three months ago,” adding that it also “supports the prospect of further monetary policy tightening in the months ahead.”

Meanwhile, financial market participants are also discussing the likelihood of a 50 basis points (bps) interest rate hike by the BoJ in the policy meeting on September 18.

Rabobank said in a note that market chatter around the prospect that the BoJ “might even think about a 50bps hike” has also intensified.

On the Euro front, investors await the European Central Bank’s (ECB) monetary policy announcement on Thursday. The ECB is widely anticipated to hike policy rates in the meeting, which underpins investors' focus on the central bank’s remarks on the interest rate outlook.

Survey points to divided views on ECB terminal rate

Analysts at Deutsche Bank highlight that “current market pricing implies that the ECB should hike to around 3% by the middle of next year,” but their latest survey shows investors are far from united on how far the current tightening cycle will ultimately go. They note that respondents “are divided as to how far the ECB will go with this hiking cycle,” with views on the terminal rate “fairly evenly split across 2.50% (31%), 2.75% (37%) and 3.00% (26%).”

Economic Indicator

ECB Main Refinancing Operations Rate

One of the three key interest rates set by the European Central Bank (ECB), the main refinancing operations rate is the interest rate the ECB charges to banks for one-week long loans. It is announced by the European Central Bank at its eight scheduled annual meetings. If the ECB expects inflation to rise, it will increase its interest rates to bring it back down to its 2% target. This tends to be bullish for the Euro (EUR), since it attracts more foreign capital inflows. Likewise, if the ECB sees inflation falling it may cut the main refinancing operations rate to encourage banks to borrow and lend more, in the hope of driving economic growth. This tends to weaken the Euro as it reduces its attractiveness as a place for investors to park capital.

Read more.

Next release: Thu Sep 10, 2026 12:15

Frequency: Irregular

Consensus: 2.65%

Previous: 2.4%

Source: European Central Bank

Author

Sagar Dua

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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