EUR/JPY rises above 161.00 as the BoJ keeps rates unchanged

• EUR/JPY appreciates as the BoJ kept the short-term rate target unchanged within the range of 0.15%-0.25%.
• BoJ Summary suggests that uncertainty surrounding Japan's economic and price outlook remains significant.
• The ECB is expected to reduce interest rates at every meeting until June 2025, driven by policymakers' concerns.

EUR/JPY breaks its two days of losses, trading around 161.20 during the Asian hours on Thursday. The EUR/JPY cross appreciates as the Japanese Yen (JPY) faces challenges following the Bank of Japan’s (BoJ) monetary policy decision of keeping interest rates unchanged.

The Bank of Japan maintained its policy rate for the third consecutive meeting, keeping the short-term rate target unchanged within the range of 0.15%-0.25% following its two-day monetary policy review. The decision aligned with market expectations.

According to the Summary of the BoJ Policy Statement, Inflation is expected to reach a level broadly consistent with the BoJ's price target in the latter half of its three-year projection period, extending through fiscal 2026. However, uncertainty surrounding Japan's economic and price outlook remains significant. The impact of foreign exchange (FX) volatility on inflation could be more pronounced than in the past, owing to changes in corporate wage and price-setting behaviors.

The upside of the EUR/JPY cross could be restrained as the Euro faces challenges due to rising odds of the European Central Bank (ECB) reducing interest rates at every meeting until June 2025, driven by policymakers' concerns over mounting economic risks in the Eurozone.

Speaking at the Annual Economics Conference, ECB President Christine Lagarde signaled the central bank’s readiness to implement additional rate cuts if incoming data confirms that disinflation remains on course. Lagarde also remarked that the earlier emphasis on maintaining "sufficiently restrictive" rates is no longer justified.