EUR/JPY 2025: Should I take a position in yen now? Complete investment guide

The EUR/JPY pair has experienced intense fluctuations during the first months of 2025. With movements exceeding eight yenes in just four months, investors are wondering if this is the right time to build positions in Japanese currency. This analysis examines macroeconomic factors, technical signals, and specific strategies that every investor should consider.

The Pillars of Current Volatility

The weakening of the interest rate differential

The divergence between monetary policies has been the main driving force. The Bank of Japan will begin its tightening cycle with projected increases up to 1% before October, while the European Central Bank continues cutting rates toward 2% as economic activity slows down. This parallel cycle change is altering the fundamental equation of the pair.

Demand for safe-haven assets

The yen maintains its position as the premier safe-haven currency. When global markets face turbulence—trade tariffs, geopolitical tensions, or stock market corrections—investors migrate toward yen. This mechanism explains both the annual low of 155.6 ¥ reached in February and the high of 164.2 ¥ in May.

The carry trade factor

Historically, financing in low-cost yen to invest in higher-yield assets was a guaranteed path. That cycle is coming to an end. As the BoJ raises its reference rates, the yen borrowing premium decreases, and the strategy loses attractiveness, providing structural support for the Japanese currency.

Technical Analysis: Correction Signals

The daily chart of EUR/JPY reveals a complex scenario. The price fluctuates above its main moving average (around 161), confirming an uptrend in place since March. However, exhaustion signals appear.

Recent candles show narrow bodies clustered near the upper edge of the Bollinger band (resistance at 164.0). The 14-session RSI retreats from 67 toward 56, drawing a bearish divergence with the May 1 high. The channel has narrowed significantly, a classic pattern that anticipates an expansive move.

Key levels for trading:

Supports: Bollinger middle band at 162.5; confluence at 161; critical zone 159.8-160

Resistances: 164.2 (annual high); breakout toward 166-168 if surpassed

Technical analysis suggests a possible correction as indicators unwind, although the medium-term bias remains bullish for the yen.

Consolidated Year-End Forecasts

Projections from different platforms converge within similar ranges:

• LongForecast: 165-173 ¥
• CoinCodex: 166.08-171.94 ¥
• Traders Union: 165.64 ¥
• Bankinter: 160-170 ¥

Despite methodological differences, all indicate a sideways movement with a very gradual downward trend for EUR/JPY, reflecting the yen’s progressive appreciation.

Practical Investment Strategies

Short-term trading (3 to 6 months)

The pair oscillates within the 160-170 channel. When approaching 165-170, investors can sell euros and accumulate yen aiming for 162 as a target. A disciplined stop should be placed at 171. Bank of Japan meetings generate volatility of one to two yen in hours, an opportunity for active traders using small-sized derivatives.

Building medium-term positions

Gradual accumulation minimizes entry risk. Buying yen whenever the pair exceeds 163-164 allows averaging the entry price. This approach is especially recommended for investors with hedging needs in euro flows; forwards and yen deposits offer protection with decreasing costs as the interest differential narrows.

Profit-taking and risk management

If the pair falls toward 160-162 after the expected summer and autumn increases, it is prudent to liquidate at least part of the gains, reserving some as protection against geopolitical shocks. Stops should be meticulously reviewed after each monetary policy decision.

Risks to Monitor

Bullish scenarios for the euro:

• A surprise pause by the Bank of Japan if local inflation unexpectedly recedes
• A rebound in core inflation in the eurozone that halts new ECB rate cuts
• A prolonged stock rally that reactivates the carry trade
• These scenarios would push EUR/JPY toward the upper range of 167-168 ¥

Favorable bearish scenarios (for the yen):

• A new round of tariffs between the US and the European Union
• Risk aversion shocks that strengthen safe-haven demand
• Confirmation from the Bank of Japan on the continuation of its tightening cycle in 2026
• These factors would pressure the pair toward 158-160 ¥

Historical Perspective

Since 1999, EUR/JPY has reflected the struggle between the European single currency and the safe-haven yen. During the 2008 crisis and the European sovereign debt crisis of 2010-2012, the yen strengthened while the euro weakened. However, years of expansive policy from the Bank of Japan combined with European economic recovery reversed the trend. Today, with the BoJ normalizing and the ECB cutting, the pair is again heading toward territories favorable to the Japanese currency.

Base Scenario and Final Conclusions

The forecast for the end of 2025 places EUR/JPY near 162 ¥, with a slightly yen-favorable bias if the Bank of Japan confirms the continuation of its monetary normalization.

This is the first real cycle change in nearly two decades. The carry trade no longer functions as a money-making machine, and the yield differential has shrunk from two percentage points to just over one. These structural forces support a moderate and gradual revaluation of the yen.

For active investors: Sell euros and buy yen on rebounds toward 165-170 ¥, with targets at 160-162 ¥ and stops at 171 ¥.

For passive investors: Accumulate yen in tranches at current levels, anticipating sustained appreciation with good risk control.

The EUR/JPY pair offers, for the first time, a clear directional investment opportunity with well-defined risk limits. Future behavior will depend on whether both central banks maintain their current rate trajectories, but all signs suggest that the yen has definitively regained its role as a currency of structural strength.