The EUR/JPY pair extended its decline for a third consecutive session on Friday, hovering around 175.70 during Asian trading hours. The cross remains under pressure as the Japanese Yen (JPY) continues to gain traction following hawkish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda, which reignited speculation over a potential near-term policy adjustment.
Speaking in Washington after the Group of 20 meeting, Ueda stated that the BoJ would continue normalizing monetary policy if confidence in Japan’s economic outlook improves—leaving the door open to a rate hike.
“There’s no change in our stance that we will adjust the degree of monetary easing if our confidence in hitting the outlook increases,” he said, according to Bloomberg. His comments strengthened expectations that the central bank may adopt a more assertive tightening approach in the coming months, driving renewed demand for the yen.
In domestic politics, traders are closely monitoring developments ahead of the October 21 parliamentary vote to select Japan’s next prime minister. The opposition has yet to respond to the ruling Liberal Democratic Party’s (LDP) proposal, while Japan Innovation Party (Ishin) co-founder Hirofumi Yoshimura said the chances of a coalition with the LDP are “50-50,” highlighting continued political uncertainty that could influence market sentiment.
On the European side, the downside for the common currency appears limited after the French government narrowly survived a no-confidence vote. Prime Minister Sebastien Lecornu’s decision to suspend a contentious pension reform helped secure support from parts of the opposition, easing near-term political risks.
Meanwhile, European Central Bank (ECB) policymaker and Maltese central bank governor Edward Scicluna reinforced expectations that the ECB will hold interest rates steady for now. Scicluna cautioned against rushing into further rate cuts, emphasizing the uncertainty around how recent trade tariffs might impact inflation dynamics. His comments offered modest support to the euro, helping to cushion deeper losses in the EUR/JPY pair.
