The EUR/JPY pair edged lower toward 176.60 during Friday’s Asian session as the Japanese Yen gained strength on renewed expectations of a potential rate hike from the Bank of Japan (BoJ).

Minutes from the BoJ’s September policy meeting showed that more policymakers believe conditions are aligning for a rate increase, with two members even calling for an immediate hike. The hawkish tone of the minutes has bolstered sentiment around the JPY, suggesting a possible shift away from its long-standing ultra-loose policy.

Further support for the Yen came from verbal intervention by Japanese officials. Finance Minister Satsuki Katayama reiterated last week that authorities are “monitoring foreign exchange movements with a high sense of urgency,” signaling growing concern over excessive yen weakness.

On the European side, the European Central Bank (ECB) maintained a cautious stance. President Christine Lagarde remarked that the ECB is “in a good place” and will act as needed to maintain stability. Echoing her view, Governing Council member Boris Vujcic stated that the current policy setting is appropriate, emphasizing that inflation is approaching the ECB’s target.

Market participants interpret the ECB’s tone as a sign that further rate moves are unlikely in the near term. According to Morningstar, swap markets currently price in less than a 50% chance of additional cuts by July 2026, with just one 25-basis-point reduction anticipated by September 2026.

Despite the ECB’s steady approach, the Yen’s renewed momentum and hawkish BoJ outlook have put downward pressure on the pair, leaving EUR/JPY trading near 176.50 as investors weigh diverging central bank trajectories.