EUR/JPY Rebounds as BoJ Holds at One Percent and Eurozone CPI Rises
The Euro rebounded against the Japanese Yen on Friday as the Bank of Japan's monetary policy decision was widely expected and did not lead to any surprises. The EUR/JPY cross traded around 184.00 after plunging to near 182.00 from around 187.00 earlier in the week, due to what appears to have been another intervention by Japanese authorities in the foreign exchange market.
The Bank of Japan left its short-term interest rate unchanged at 1% at the conclusion of its July policy meeting, with an 8-1 vote in favor of the decision. The institution slightly upgraded its fiscal 2026 real Gross Domestic Product (GDP) growth forecast to 0.6% from 0.5% previously, while lowering its fiscal 2026 core Consumer Price Index (CPI) forecast to 2.5% from 2.8% in April.
The decision was approved despite some concerns about the potential impact of geopolitical tensions on inflation and the economy. Board member Hajime Takata was the sole dissenter, arguing in favor of another interest rate hike as he believes geopolitical tensions could generate more persistent inflationary pressures through higher energy prices and stronger demand.
On the European side, the latest inflation figures are supporting the Euro (EUR). The Eurozone Harmonized Index of Consumer Prices (HICP) accelerated to 2.9% YoY in July, in line with expectations, while core inflation rose to 2.5%, above the 2.4% consensus.