EUR/JPY stays muted around 183.00 as BoJ's move toward policy normalization gathers momentum

EUR/JPY Holds Steady as Bank of Japan Maintains Policy Direction

The EUR/JPY currency pair remains relatively flat, with the Japanese Yen (JPY) finding support amid expectations that the Bank of Japan (BoJ) will persist with its gradual shift toward policy normalization. During Thursday’s Asian trading session, the pair hovered near the 183.00 mark.

Earlier this week, BoJ Governor Kazuo Ueda reiterated that the central bank is prepared to continue increasing interest rates if economic trends and inflation align with their projections. Ueda also emphasized that scaling back monetary stimulus could foster stable economic growth, with both wages and prices expected to rise at a moderate pace.

In November 2025, Japan’s Labor Cash Earnings grew by only 0.5% year-over-year, a significant slowdown from the 2.5% increase seen in October and well below the anticipated 2.3%. This marked the slowest wage growth in nearly four years, largely due to a 17% annual decrease in bonus payments. Additionally, real wages dropped by 2.8% as inflation continued to outstrip wage gains, complicating the BoJ’s efforts to tighten monetary policy.

Despite the Yen’s recent resilience, geopolitical risks could weigh on the currency. Tensions between Japan and China have escalated after Beijing imposed export restrictions on certain rare earths and other goods with potential military applications. Diplomatic relations have worsened following comments by Japanese Prime Minister Sanae Takaichi, who warned that a Chinese incursion into Taiwan would threaten Japan’s security and might trigger a military response from Tokyo, as reported by CNN.

Key Economic Data to Watch

• Germany’s Factory Orders
• Eurozone Business Climate
• Eurozone Unemployment Rate

Later today, traders will be monitoring these medium-impact indicators for further market direction. On Wednesday, Eurostat released preliminary figures for the Eurozone Harmonized Index of Consumer Prices (HICP) for December, which showed a 2% annual increase—matching expectations but slightly below November’s 2.1% rise.

Month-over-month, inflation edged up by 0.2% after a 0.3% decline in the previous month. The Core HICP, which excludes food, energy, alcohol, and tobacco, rose by 2.3% year-on-year, a marginal slowdown from the prior 2.4% reading. On a monthly basis, the core index increased by 0.3%.