EUR/JPY Holds Above 173.00 as Tokyo CPI Softens and Yen Weakens

EUR/JPY Holds Above 173.00 After Tokyo CPI Supports Yen Weakness

The EUR/JPY pair continues its seven-session winning streak, trading around 173.10 during the Asian session on Friday. The move is driven largely by weaker-than-expected inflation data out of Tokyo, which has applied pressure on the Japanese Yen (JPY).

Tokyo CPI Shows Slight Decline in July

According to Japan’s Statistics Bureau, the Tokyo Consumer Price Index (CPI) rose by 2.9% year-over-year in July, down from 3.1% in June. Other core inflation measures also edged lower:

CPI excluding Fresh Food: 2.9% YoY (vs. 3.0% forecast; 3.1% previous)
CPI excluding Fresh Food and Energy: 2.9% YoY (down from 3.1% last month)

Although these figures came in slightly below expectations, inflation remains well above the Bank of Japan's 2% target, reinforcing speculation that the BoJ could hike rates again before the end of 2025.

BoJ Policy Outlook: Hike Still on the Table

Despite cooling inflation, core readings continue to reflect persistent price pressures, which may prompt the Bank of Japan (BoJ) to tighten policy further. However, the modest decline in CPI may delay any immediate decision, leaving the Yen vulnerable to short-term weakness.

ECB Maintains Data-Driven Policy Approach

On the European front, the European Central Bank (ECB) reiterated its data-dependent stance, noting that further policy clarity will depend on upcoming economic indicators. This cautious position hasn't significantly impacted the Euro, which remains firm against the weakening Yen.