EUR/JPY sees upside above 142.00 despite BOJ looks to exit loose policy ahead

• EUR/JPY is aiming to surpass 142.00 as Eurozone wage inflation may call for further policy tightening
• ECB Centeno expects the current process of interest rate increases is approaching its end.
• Japan may look for an exit from the ultra-loose monetary policy after the appointment of the new BOJ Governor.

The EUR/JPY pair is struggling to extend its upside journey above the immediate resistance of 142.00 in the early Asian session. The cross is demonstrating a sideways profile but is likely to remain in the bullish trajectory amid an upbeat market mood.

The Euro drove the cross to neat 142.00 firmly after European Economic Affairs Commissioner Paolo Gentiloni trimmed the contraction forecast for Eurozone Gross Domestic Product (GDP). In an interview with the Italian newspaper Il Sole 24 Ore, Gentiloni stated that he expects Eurozone GDP contraction around the start of this year may be less deep than was expected in November.

He further added that “The 0.3% forecast still seemed quite solid but various factors suggested the contraction expected in the fourth quarter of 2022 and the first quarter of this year would not be so sharp as had been expected,”

On the interest rate front, Reuters reported that the European Central Bank (ECB)'s governing council member Mario Centeno said on Tuesday the current process of interest rate increases is approaching its end. Centeno expects that the stubborn price index will face resistance in January and February but will start falling in March.

Contrary to the viewpoint of ECB Centeno, Economic Bulletin published by the ECB clears that wage growth is going to be extremely solid ahead led by robust labor markets that so far have not been substantially affected by an economic slowdown, increases in national minimum wages, and some catch-up between wages and high rates of inflation. Wage inflation is becoming a barrier for central banks in achieving price stability and it might force ECB President Christine Lagarde to continue to keep policy restrictive ahead.

On the Tokyo front, Japanese Prime Minister Fumio Kishida said that his government and the central bank must discuss their relationship in guiding economic policy after he names a new Bank of Japan (BOJ) governor in April. He further added that the administration is looking to revise its long-decade blueprint of beating deflation and may look for an exit from ultra-loose monetary policy.