The Euro (EUR) extended gains against the Japanese Yen (JPY) on Wednesday, marking its fourth straight session of advances. At the time of writing, the EUR/JPY pair trades around 177.50, up 0.20% for the day, after touching a fresh record high of 177.86 earlier in the session. The move is largely driven by broad Yen weakness following soft wage data from Japan, which tempered expectations of an imminent policy shift by the Bank of Japan (BoJ).
Weak wage growth pressures the Yen
Japan’s Labor Cash Earnings rose just 1.5% year-on-year in August, sharply lower than July’s 4.1% increase and below the market consensus of 2.6%. Meanwhile, real wages fell 1.4% from a year earlier—marking the eighth consecutive month of decline—as inflation continues to erode household purchasing power. The disappointing figures further weaken the case for near-term monetary tightening by the BoJ, supporting continued weakness in the Yen.
Tokyo politics add to policy uncertainty
Political developments in Tokyo added another layer of uncertainty. Sanae Takaichi’s victory in the ruling Liberal Democratic Party (LDP) leadership race positions her as Japan’s next Prime Minister, but her expansionary fiscal stance may complicate the BoJ’s policy outlook.
Her adviser, Takuji Aida, stated that a rate hike in October would be premature. Additionally, the LDP’s decision to postpone the start of the extraordinary Diet session until at least October 20 underscores ongoing challenges in securing cooperation from its coalition partner, the Komeito party.
French political talks offer limited relief for the Euro
On the European front, EUR/JPY’s upside remains capped by lingering political uncertainty in France. However, comments from recently resigned Prime Minister Sébastien Lecornu offered a modest lift to the Euro. Lecornu said he would present a proposal to President Emmanuel Macron later on Wednesday and noted that “the dissolution of parliament is becoming increasingly unlikely.”
His remarks helped ease immediate concerns about prolonged political instability. Lecornu is scheduled to speak at 18:00 GMT, and while no formal announcements are expected, traders will be watching closely for any tone or messaging that could influence Euro sentiment.
