EUR/JPY holds near record highs as Yen weakens after BoJ; ECB decision eyed

• EUR/JPY surges to an all-time high as the Yen weakens sharply across the board following the Bank of Japan’s interest rate decision.
• The BoJ kept its policy rate unchanged at 0.50%, in a 7-2 vote, as policymakers maintained an accommodative stance.
• The Euro stays well-supported ahead of the European Central Bank (ECB) interest rate decision due at 13:15 GMT.

The Euro (EUR) is holding firm against the Japanese Yen (JPY) after surging to record highs earlier in the day, as the Yen remains broadly weaker across major peers following the Bank of Japan’s (BoJ) interest rate decision. At the time of writing, EUR/JPY is trading around 178.30, up nearly 0.60% on the day as traders await the European Central Bank (ECB) monetary policy announcement.

The BoJ kept its short-term policy rate unchanged at 0.50%, in line with market expectations. The decision, passed by a 7-2 vote, saw board members Naoki Tamura and Hajime Takata dissent in favour of a 25 basis-point (bps) hike to 0.75%. The central bank also maintained its dovish stance, signalling that monetary conditions would stay accommodative as policymakers monitor wage dynamics and inflation trends. The outcome reinforced investor perceptions that Japan’s rate normalisation will remain gradual, weighing on the Yen.

BoJ Governor Kazuo Ueda maintained a cautious tone in his post-meeting remarks, saying that the central bank “will continue to raise the policy rate if the economy and prices move in line with forecasts, in accordance with improvements in the economy and prices.” However, when asked about the decision to hold off on a rate hike this time, Ueda noted that “overseas economies and trade policy uncertainties remain high."

Attention now turns to the ECB interest rate decision, due at 13:15 GMT. The central bank is widely expected to keep all three key policy rates unchanged, with the Deposit Facility Rate at 2.00%, the Main Refinancing Operations Rate (MRO) at 2.15%, and the Marginal Lending Facility Rate at 2.40%. Traders will closely watch President Christine Lagarde’s tone at the post-meeting press conference for clues on future policy direction.

Earlier in the day, preliminary data showed that Eurozone Gross Domestic Product (GDP) grew 0.2% QoQ in the third quarter, matching the previous quarter’s pace and slightly above the 0.1% forecast. On an annual basis, GDP rose 1.3% year-on-year (YoY), surpassing expectations of 1.2% but easing from 1.5% in the prior reading. The figures highlight moderate but steady growth, supporting the ECB’s case for maintaining its current policy stance.