EUR/JPY remains resilient near 163.00 despite a BoJ rate hike

• EUR/JPY maintains its position despite a rate hike by the Bank of Japan on Friday.
• The BoJ raised its short-term rate target by 25 basis points to 0.40%-0.50%, marking the highest rate level since 2008.
• The Euro strengthens as risk sentiment improves following recent remarks from US President Donald Trump.

EUR/JPY recovers recent losses, hovering around 163.00 during Friday's Asian session. The EUR/JPY cross remains resilient despite the Bank of Japan (BoJ) raising its short-term rate target by 25 basis points (bps) from 0.15%-0.25% to 0.40%-0.50% following its two-day monetary policy review. This move, in line with market expectations, marks the highest rate level since 2008 after three consecutive meetings of holding steady.

Data from the Japan Statistics Bureau released on Friday showed that the National Consumer Price Index (CPI) rose 3.6% year-over-year (YoY) in December, up from 2.9% in the previous month. Core consumer prices increased as expected, climbing from 2.7% to 3.0% – the highest level since mid-2023. Additionally, the core measure excluding fresh food and energy prices held steady, rising 2.4% YoY in December, supported by robust private consumption.

The Euro appreciates against its peers amid improved risk sentiment following recent remarks from US President Donald Trump. Trump said he wants the US Federal Reserve (Fed) to cut interest rates immediately at the World Economic Forum in Davos, Switzerland.

Moreover, Trump expressed optimism, stating that he "would rather not have to use tariffs on China" and is hopeful about reaching a deal. Trump's remarks came after his conversation with China’s President Xi Jinping on Thursday, hinting at potential progress in US-China trade negotiations.

However, the Euro’s upside could be restrained as markets anticipate a 25 basis point (bps) rate cut at each of the next four ECB policy meetings, driven by concerns over the Eurozone’s economic outlook and the belief that inflationary pressures will remain subdued.