The euro weakened against the Japanese yen on Monday, with the EUR/JPY pair falling to around 164.85 during early European trading, ending a two-day winning streak. The decline comes as market sentiment tilts in favor of further monetary tightening by the Bank of Japan (BoJ), lending strength to the yen.
Supporting this outlook, revised data released by Japan’s Cabinet Office on Monday showed that the country’s economy contracted at an annualized rate of 0.2% in the first quarter of 2025—less severe than the initially reported 0.7% decline. On a quarterly basis, Japan’s GDP growth was flat, an improvement from the prior estimate of a 0.2% contraction and better than market expectations.
The upward revision in GDP has reinforced investor expectations that the BoJ may continue to raise interest rates, ahead of its upcoming two-day policy meeting next week.
On the European side, the euro faces pressure following the European Central Bank’s (ECB) decision last week to cut key interest rates by 25 basis points. While signaling the possible conclusion of its easing cycle, ECB President Christine Lagarde emphasized over the weekend that interest rates are now “in a good position.” However, she also acknowledged heightened global uncertainty, particularly stemming from renewed tariff threats by U.S. President Donald Trump.
Later on Monday, markets will turn their attention to the release of the Eurozone’s June Sentix Investor Confidence data, which could offer further insight into economic sentiment across the region.
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