EUR/JPY in 2025: When is the right time to exchange euros for yen?

The volatility of the euro/yen currency pair has marked what has been of 2025 with fluctuations of more than eight yenes in just four months. This movement reflects a profound structural change in the interest rate differentials between the Eurozone and Japan, which completely redesigns the incentives for those seeking to convert euros to yen or hold positions in Japanese currency.

The Five Factors Explaining the Turbulence

The tightening of the Bank of Japan

The first shock came in January when the BoJ raised its benchmark rate from 0.25% to 0.50%, the highest level since 2008. The yen immediately appreciated, but the momentum dissipated quickly because European yields remained substantially higher than Japanese yields.

US tariffs as a catalyst for risk aversion

In February, Washington announced a 10% tariff on all imports and an additional 20% for EU products. The trade panic spiked demand for safe-haven assets and pushed the EUR/JPY cross down to its low of 155.6 yen on February 27. This episode confirmed a critical point: the yen acts as a safe-haven currency because Japan holds a net international creditor position and does not depend on external financing.

The yen market as a safe harbor during turbulence

Beyond Japan’s economic strength, the yen is driven by a technical factor: when investors borrow in yen to finance carry trade (buying higher-yielding assets), during crises they close these positions, repurchasing yen massively. Coupled with the fact that the yen market is the deepest and most liquid in Asia, it becomes the most accessible Asian currency for executing defensive trades quickly.

ECB rate cuts slow euro rebounds

The European Central Bank reduced its deposit facility from 4% to 2.25% in three steps (January 30, March 12, and April 17). With the eurozone slowing down and inflation easing, each cut acted as a brake on the euro’s attempts to recover.

Chinese stimulus in May rekindles risk appetite

Beijing injected liquidity by lowering its 7-day repo rate to 1.40% and reducing bank reserve requirements. This move reactivated Asian equity markets, diverting capital from refuges like the yen and allowing EUR/JPY to climb to 164.2 yen on May 1.

Base Scenario for the End of 2025

Divergence of monetary cycles favoring the yen

The market expects the BoJ to raise its rate to 0.75% in summer and to 1% before autumn. It’s not a drastic shift, but enough to erode the carry trade attractiveness: each Japanese rate hike reduces the profitability of financing in yen to buy more lucrative assets. Structurally, this reduces yen supply and supports the currency.

The eurozone shows the opposite dynamic. With decreasing inflation and growth affected by tariffs, the ECB will likely raise its rates to 2% before Christmas. This adjustment will narrow the yield differential to just over one percentage point: a spread that no longer compensates for the risk of deploying capital into euros in an unstable global context.

Broad range forecast with a gradually downward bias

The most probable outcome is a cross confined within a wide band but slowly trending downward. When markets breathe a sigh of relief and risk appetite returns, the euro should find resistance above 165 yen. When geopolitical shocks, surprising US inflation data, new trade tariffs, or stock corrections occur, the yen will regain its defensive role and could push the pair toward 158-160 yen.

Our base scenario places EUR/JPY near 162 yen by year-end, with a slight tilt toward a stronger yen if the BoJ confirms the continuation of its rate hike cycle in 2026.

Technical Analysis of EUR/JPY

The daily chart shows a moderate bullish bias losing momentum. The price trades above the main moving average (≈161 yen), confirming the upward trend since early March. However, recent candles show narrow bodies clustered near the upper edge of the Bollinger band (upper at 164.0; moving average at 162.5), indicating fatigue in buying pressure.

The Bollinger channel has narrowed significantly compared to March: this is a classic precursor to a sharp move when the range expands again.

The 14-session RSI trades at 56 after touching 67 a week ago. The oscillator leaves overbought territory and shows a bearish divergence against the May 1 high (164.2 yen), reinforcing the scenario of a pause or correction in the short term.

Key technical levels

Supports: The Bollinger middle at 162.5 is the immediate support. Lower, the confluence of the lower band and moving average around 161 yen. Breaking this level would open the door to 159.8-160 yen.

Resistances: The critical level remains at 164.2 yen. A clear close above would stimulate movement toward 166-168 yen.

In summary, although a bullish tone persists, it’s advisable to watch for a pullback as indicators unwind.

Forecast Comparison by Institutions

Different platforms project varied ranges for EUR/JPY due to different methodologies:

• LongForecast: 165-173 yen (monthly range for December)
• CoinCodex: 166.08-171.94 yen (wider annual range)
• Traders Union: 165.64 yen (specific closing projection)
• Bankinter: 160-170 yen (consensus range)

The convergence in the 160-170 yen zone reinforces the reliability of the base scenario.

Tactics for Converting Euros to Yen: Strategies by Time Horizon

Short-term trading (3-6 months)

The cross has been trading within the 160-170 yen channel since the start of the year. Each time it approaches the upper zone (165-170), it makes sense to sell euros and buy yen aiming for 162 as the first target, with disciplined stops above 171 yen.

Pre-BOJ meeting days generate quick oscillations of one to two yen. Active traders can capitalize on these moves with small futures or put-spread options that reduce initial premium.

Medium-term positioning (year-end 2025)

Investment bank projections converge at 160-170, while optimistic algorithmic models reach 170-173. A prudent tactic is to accumulate yen in tranches: buy each time EUR/JPY exceeds 163-164, averaging the price and reducing the risk of a sudden entry.

Those needing euro flow hedges can set forwards or deposits in yen near current levels. The cost of hedging decreases as the interest rate differential narrows.

Realizing profits

If the cross falls to 160-162 after the BoJ hikes expected for summer and autumn, it’s advisable to realize at least part of the gains, leaving residual exposure as protection against geopolitical shocks that historically favor the yen.

Main Risks That Could Alter the Outlook

An unexpected pause by the BoJ if Japanese inflation subsides, an unforeseen rise in European core inflation that halts ECB cuts, or a prolonged stock rally reactivating carry trade could push the cross back to the upper part of the range.

Additional trade risks: a new round of tariffs between the US and EU would boost the yen as a refuge, pushing the pair toward 158-160 yen. Conversely, any gesture of détente would allow rebounds toward 167-168 yen.

Maintaining clear stops and reviewing exposure after each central bank meeting remains essential.

Historical Context: The Evolution of EUR/JPY since 1999

Since its inception in 1999, this pair has witnessed the yen’s strength as a refuge during crises and fluctuations of the euro against European challenges.

During the 2008 financial crisis, the yen strengthened markedly due to its defensive status, while the euro depreciated amid economic instability and debt crises in the eurozone in early 2010s.

European economic recovery and recent BoJ expansionary policies favored a gradual appreciation of the euro. Now, with the BoJ raising rates and the ECB cutting them, the pair again trades between 160-165 yen: the struggle between a yen regaining its refuge role and a euro pressured by European slowdown.

Final Verdict

Projections for EUR/JPY at year-end 2025 converge in the 158-170 yen range, reflecting a market that finally accepts the cycle change: the BoJ ends with near-zero interest rates while the ECB reduces rates. The yield gap, which a year ago was around two points, will be reduced to just over one, eliminating the classic incentive to finance in yen to buy euros.

Added to this is the defensive condition of the Japanese currency during trade tensions. With the pair still bouncing between 160 and 170 yen, it’s an opportune moment to buy yen on rebounds toward 165-170 yen, aiming for 160-162 as the target and managing risk at 171 yen.

The main risk is that the BoJ halts rate hikes or that European inflation resurges, but the structural bias has definitively shifted in favor of the yen. For the first time in nearly two decades, carry trade ceases to be a one-way path, suggesting a downward trend although gradual for the euro/yen for the remainder of the year.