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• EUR/JPY depreciates as the latest BoJ Meeting Minutes highlighted the possibility of gradual rate hikes if inflation trends as expected.
• The Euro remains under pressure as ECB plans to continue lowering borrowing costs next year.
• ECB Lagarde highlighted that the central bank could achieve its goal of reducing inflation to the 2% medium-term target.

EUR/JPY retraces its recent gains from the previous session, trading around 163.20 during the European hours on Tuesday. The EUR/JPY cross remains subdued following the release of the Bank of Japan's (BoJ) Meeting Minutes for October’s monetary policy.

BoJ board members highlighted the possibility of gradual rate hikes if inflation trends align with expectations, potentially reaching 1.0% by late fiscal 2025. The Meeting Minutes also underscored a cautious approach to monetary policy, focusing on wage-driven economic growth while addressing domestic and global uncertainties, along with fiscal measures to counter deflationary pressures.

Japan’s Finance Minister Katsunobu Kato stated on Friday that the government “will take appropriate action against excessive moves” in the foreign exchange market and will continue coordinating with international authorities on forex policies.

Last week, BoJ Governor Kazuo Ueda reiterated that the central bank would wait for further data to assess whether wage growth could maintain its upward momentum next year, aiming for greater clarity on economic trends.

The downside risks for the EUR/JPY cross is strengthened due to the subdued Euro amid rising bets of further rate reduction by the European Central Bank (ECB). Financial Times published an interview of European Central Bank (ECB) President Christine Lagarde on Monday, stating that the central bank is nearing its goal of sustainably bringing inflation down to the medium-term target of 2%. However, Lagarde stressed the importance of continued vigilance, particularly concerning inflation in the services sector.

On Saturday, ECB Governing Council member Boris Vujcic highlighted that the central bank plans to continue lowering borrowing costs in 2025, according to Bloomberg. “The direction is clear—it’s a continuation of the path from 2024, with further reductions in interest rates,” he said.

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