EUR/JPY edged lower during the Asian session on Wednesday, trading around 175.70 after limited gains in the previous session. The pair weakened as the Japanese Yen (JPY) strengthened following disappointing industrial data from Japan and growing safe-haven demand amid renewed US-China trade tensions.
Japan’s industrial output weakens further
Japan’s Industrial Production declined 1.6% year-over-year (YoY) in August, extending the previous 1.3% drop. On a monthly basis, production fell 1.5%, worse than the 1.2% decrease recorded previously. The data underscored persistent weakness in Japan’s manufacturing sector, weighing on growth prospects.
Investors now await the release of preliminary Eurozone Industrial Production data for August, which could provide further direction for the EUR/JPY pair.
Safe-haven flows boost the Japanese Yen
The Yen gained traction as investors sought safe-haven assets amid escalating trade tensions between the United States and China. US President Donald Trump criticized Beijing for its “protectionist” trade measures, warning of targeted restrictions if China proceeds with new export controls on rare earth minerals and increased port fees for foreign vessels. In response, China imposed sanctions on five US-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, intensifying trade friction between the two economic powers.
Political developments in Japan and France add volatility
Market sentiment remained cautious as Sanae Takaichi, leader of Japan’s ruling Liberal Democratic Party, is set to become the next prime minister following the coalition’s split with the Komeito party. Takaichi’s support for Abenomics-style stimulus has fueled expectations of continued fiscal expansion and accommodative monetary policy, potentially limiting further Yen appreciation.
In Europe, French Prime Minister Sebastien Lecornu announced the suspension of the landmark 2023 pension reform until after the 2027 presidential election, a move aimed at easing prolonged domestic unrest. Lecornu stated, “I will propose to parliament this autumn that we suspend the 2023 pension reform until the presidential election. There will be no increase in the retirement age from now until January 2028.”
