EUR/JPY managed to break its four-day losing streak, recovering to around 160.60 during the European session on Friday. The decline in Japanese inflation figures, particularly the annual Tokyo Consumer Price Index (CPI), which dropped to 1.6% in January from the previous 2.4%, contributed to the weakening of the Japanese Yen (JPY). This, in turn, acted as a positive factor for the EUR/JPY cross.

The Japanese inflation numbers reveal a significant deviation from the Bank of Japan’s (BoJ) 2.0% target, marking the first time in almost two years that consumer inflation has fallen below this threshold. Additionally, the Core CPI (YoY) decreased from 3.5% to 3.1%.

The Bank of Japan’s December meeting minutes highlighted a consensus among board members to “patiently maintain an easy policy.” Many emphasized the need to confirm a positive wage inflation cycle before considering an end to negative rates and Yield Curve Control (YCC). BoJ Governor Kazuo Ueda reiterated a strong commitment to achieving the 2.0% inflation target, suggesting a potential gradual reduction of extensive stimulus measures in the future.

Conversely, the European Central Bank (ECB) opted to keep its interest rates unchanged for the third consecutive meeting, adding downward pressure on the Euro (EUR). ECB President Christine Lagarde’s mention of the possibility of a rate cut in the summer contributed to losses for the Euro, weighing on the EUR/JPY cross. The ECB maintained the Main Refinancing Operations Rate at 4.50% and the Deposit Facility Rate at 4.0%.