During Tuesday’s early European session, the EUR/JPY pair regained lost ground, trading near 183.55. The Japanese Yen (JPY) is weakening against the Euro amid growing anxiety over Japan’s fiscal health. Market participants are also looking ahead to the release of the Bank of Japan (BoJ) Monetary Policy Meeting Minutes on Wednesday.
Ahead of Japan’s February 8 election, Prime Minister Sanae Takaichi has unsettled the Japanese debt market with pledges to lower tariffs. On Monday, she announced plans for a two-year suspension of the 8% food tax at the earliest opportunity, intending to submit legislation for the fiscal 2026 session. Takaichi’s aggressive spending and tax cut proposals have heightened concerns about the nation’s fiscal stability, pressuring the Yen and providing a tailwind for the EUR/JPY cross.
Conversely, traders remain cautious about the possibility of coordinated currency intervention by US and Japanese authorities, which could offer support to the Yen. PM Takaichi warned on Sunday that the government would take necessary steps against speculative market moves, though she did not specify the market. Furthermore, Chief Cabinet Secretary Seiji Kihara stated Monday that appropriate foreign exchange action would be taken based on the Japan-US joint statement.
