EUR/JPY hovers near 183.00 amid concerns over Japan’s deteriorating fiscal outlook

• EUR/JPY holds steady as the Japanese Yen stays under pressure amid concerns over Japan’s weakening fiscal outlook.
• Japan’s PM Sanae Takaichi stressed proactive fiscal policy over excessive tightening to strengthen Japan’s capabilities.
• The Euro gained against major peers as easing Eurozone inflation reduced prospects of further ECB easing.

EUR/JPY holds ground after registering 0.51% gains in the previous session, trading around 182.90 during the Asian hours on Thursday. The currency cross holds steady as the Japanese Yen (JPY) remains under pressure amid worries about Japan’s weakening fiscal outlook.

Japanese Prime Minister Sanae Takaichi on Wednesday underlined the need for proactive fiscal policy to strengthen Japan’s capabilities, rather than excessive fiscal tightening. Takaichi said, “We will achieve sustainable fiscal policy, social welfare system by reflating the economy, improving corporate profits, increasing household income via wage gains that then boost tax revenues.”

The JPY could find support as the Bank of Japan (BoJ) is widely expected to raise its policy rate by 25 basis points to 0.75% on Friday, with elevated food prices keeping inflation above the central bank’s 2% target. Markets will closely watch Governor Kazuo Ueda’s post-meeting comments for clues on next year’s policy path, amid speculation that rates could rise to 1% by July.

The Euro (EUR) advanced against its major peers as easing inflation in the Eurozone (EZ) reduced the likelihood of further monetary easing by the European Central Bank (ECB). ECB officials have indicated that additional rate cuts may not be necessary in 2026.

Attention now turns to the ECB’s December policy meeting, which is widely expected to be a non-event, with President Christine Lagarde likely to keep rates unchanged at this meeting and throughout next year.

Today Markets