EUR/JPY extended losses on Tuesday, trading near 177.20 during the Asian session, as the Japanese Yen gained strength amid rising expectations of a potential Bank of Japan (BoJ) rate hike in the coming months. Comments from BoJ Governor Kazuo Ueda last week hinted at possible tightening in December or early next year, boosting the Yen’s appeal.

However, market uncertainty lingers as Japan’s new Prime Minister, Sanae Takaichi, is expected to prioritize aggressive fiscal spending, which could delay further rate increases. Meanwhile, Finance Minister Satsuki Katayama emphasized her responsibility for overseeing currency policy, signaling potential sensitivity to sharp Yen moves.

On the other hand, the Euro may find some support as traders expect the European Central Bank (ECB) to keep rates unchanged for the rest of the year. The ECB held policy steady in October for a third straight meeting, noting stable inflation and modest economic growth. Recent Eurozone data showed inflation easing near the 2% target and stronger-than-expected GDP growth, suggesting that the bloc’s economy remains resilient.