• EUR/JPY is gaining after the BoJ left its short-term target rate unchanged at 0.15%-0.25%.
• The BoJ summary suggests that uncertainty about Japan’s economic and price outlook remains significant.
• The ECB is expected to cut interest rates at every meeting until June 2025, driven by concerns from policymakers.

EUR/JPY breaks its two-day losses, trading around 161.20 during Asian hours on Thursday. The EUR/JPY cross rate is gaining ground as the Japanese yen (JPY) faces challenges from the Bank of Japan’s (BoJ) monetary policy decision to keep interest rates unchanged.

The Bank of Japan maintained its key interest rate for a third straight meeting, keeping its short-term target rate unchanged at 0.15-0.25% following a two-day monetary policy review. The decision was in line with market expectations.

According to a summary of the BoJ’s policy statement, inflation is expected to reach levels broadly in line with the BoJ’s target price in the second half of the three-year projection period, or fiscal year 2026. However, uncertainty about Japan’s economic and price outlook remains significant. The impact of exchange rate volatility on inflation may be more pronounced than in the past due to changes in corporate wage and pricing behavior.

Advance in the EUR/JPY cross could be circumscribed as the euro faces challenges amid the growing likelihood that the European Central Bank (ECB) will cut interest rates at every meeting through June 2025, fueled by policymakers’ concerns about rising economic risks in the euro zone .

In her speech at the Annual Economic Conference, ECB President Christine Lagarde signaled the central bank’s readiness to introduce additional interest rate cuts if incoming data confirm that disinflation is still ongoing. Lagarde also noted that the previous emphasis on maintaining “sufficiently restrictive” rates is no longer justified.