Disagreements in monetary policies between Japan and Europe attract attention, with market betting on the yen strengthening against the euro.

The euro against the yen is receiving increasing attention as the divergence in monetary policies between the two regions seems to provide an opportunity for the currency pair. With the Eurozone economy struggling, the European Central Bank is expected to continue cutting interest rates, potentially by another 25 basis points next month. Meanwhile, the market expects the Bank of Japan to continue with its monetary policy normalization, with a likelihood of a rate hike next month at around 50%. Higher interest rates typically boost the respective currency as they attract funds seeking higher returns. Therefore, the policy divergence mentioned above has traders betting on the yen strengthening against the euro. Strategists from ABN Amro Bank, Nomura Securities, and Mizuho Securities predict that by the end of next year, the euro against the yen will fall to a low of 1 euro to 140-150 yen. This exchange rate has been outside of this range since June 2023, currently hovering around 1 euro to 164 yen. The uncertainty surrounding the future pace of rate cuts by the Federal Reserve and the policies that may be implemented by President Trump have brought uncertainty to the performance of the dollar. In this scenario, some strategists have a clearer understanding of the trend for the euro against the yen. Nomura Securities forex strategist Moteki Jin stated, "The Bank of Japan may hike rates multiple times in the first half of next year. Therefore, if this happens, the interest rate differential will continue to move in favor of the yen strengthening against the euro." Mizuho Securities forecasts that the yen against the euro exchange rate will rise to 1 euro to 140 yen by the end of 2025, the highest level since March 2023. ABN Amro Bank also believes that the yen against the euro may strengthen, but their forecast is more cautious. Head of Foreign Exchange Strategy at ABN Amro Bank, Jane Foley, stated in a report, "We expect the dovish stance of the European Central Bank to weaken the euro's resilience next year, and we believe there is room for the euro against the yen exchange rate to fall to 1 euro to 150 yen after 12 months." "The Eurozone is also facing structural issues and underinvestment."