EUR/JPY tests 136.00 ahead of the BOJ’s policy

• EUR/JPY has inched higher to 136.00 as investors await monetary policy announcement by the BOJ.
• Japan has announced more stimulus packages to spurt households’ real income.
• Weaponry shipments to Ukraine by the US and Europe have escalated uncertainty in the eurozone.

The EUR/JPY pair has moved towards the north after displaying back and forth moves in a narrow range of 135.41-135.68 right from the New York session as investors are awaiting the announcement of the interest rate decision by the Bank of Japan (BOJ).

Considering the lower inflation in Japan at 1.2% recorded for March 2022 against the targeted inflation of 2%, the BOJ is expected to dictate a neutral stance in its monetary policy statement. The Japanese yen has been performing vulnerable for the past few trading weeks amid its ultra-loose monetary policy. Advancing energy bills and food prices have resulted in a reduction in the real income of the households and henceforth lower aggregate demand.

On Tuesday, Japan’s administration announced that it is planning to spend 6.2 trillion yen ($48.2 billion) on additional gasoline subsidies, low-interest loans, and cash assistance to alleviate the pain of consumers and small businesses facing rising prices, as per Nikkei Asia.  More stimulus from the Japanese agencies is hurting Tokyo’s currency.

Meanwhile, the shared currency is facing the heat of lower risk appetite as comments from Russia are weighing pressure on the risk-sensitive currencies. Russian foreign minister Lavrov has stated that the threat of nuclear war is “real” after shipments of weaponry aid from the US and Europe to Ukraine. Also, Moscow announced that Poland and Bulgaria would face natural gas supply cuts on failing to pay in rubles.