EUR/JPY Falls Near 171.50 Following Stronger Japan Q2 GDP Data

EUR/JPY Falls Near 171.50 Following Strong Japan Q2 GDP Data

Japanese GDP Growth Beats Expectations

Japan’s economy showed stronger-than-expected growth in the second quarter of 2025. The preliminary data released by Japan’s Cabinet Office revealed that Gross Domestic Product (GDP) expanded by 0.3% quarter-over-quarter (QoQ), up from 0.1% in Q1. This result was in line with consensus forecasts and marked a modest economic recovery.

Key Drivers: Net Exports Support Growth

The growth was primarily driven by net exports, which contributed 0.3% to the GDP despite ongoing headwinds from US tariffs. On an annualized basis, Japan’s GDP grew by 1.0% in Q2, reversing the contraction of 0.2% observed in the first quarter.

Market Reaction: Yen Strengthens, EUR/JPY Falls

Following the release of the GDP figures, the Japanese Yen (JPY) gained strength against the Euro, pushing the EUR/JPY currency pair down to near 171.50 during Asian trading hours. The pair extended its losses for the third consecutive session amid the positive economic data from Japan.

Potential Euro Support from Interest Rate Differential

Despite the Yen’s strength, the Euro might find support in the near term due to a possible widening of the interest rate differential between the US Federal Reserve (Fed) and the European Central Bank (ECB), which could keep the EUR/JPY from falling further.

Commentary from Japan’s Economy Minister

Japan’s Economy Minister Ryosei Akazawa commented that the data points to a modest economic recovery. However, he also warned that risks related to US trade policies and rising prices could negatively affect consumer sentiment and private consumption moving forward.