EUR/JPY prepares to reach the 166.00 zone after persistent underperformance of the Japanese Yen

• EUR/JPY remains higher amid uncertainty over the BoJ's next rate hike.
• Takao Ochi believes that intervention is possible if the Yen continues to fall to 160 or 170 against the US Dollar.
• Speculation that the ECB will move towards lowering interest rates in June remains strong.

EUR/JPY aims to extend its rise to 166.00 due to persistent weakness in the Japanese Yen. The cross consolidates near multi-year highs but is expected to continue rising as investors expect the Bank of Japan (BoJ) to struggle to tighten monetary policy further due to the absence of a significant wage growth spiral. .

Apart from that, Japan has raised the bar for the USD/JPY where the administration could make a stealth intervention, which has also weighed on the Japanese Yen. In the early hours of Wednesday's European session, Takao Ochi, a senior executive in Japan's ruling party, said: “There is no broad consensus at the moment, but if the Yen slides further towards 160 or 170 per dollar, that could considered excessive and could lead policymakers to consider action,” Reuters reported.

Previously, investors were speculating that Japan would intervene in the currency arena when the Japanese Yen fell to 155.00 against the US Dollar. But now higher targets for major currencies have exposed the Japanese Yen to further declines.

Looking ahead, investors will focus on the BoJ's interest rate decision, which will be announced on Friday. A Reuters poll conducted between April 11 and 17 showed that none of the economists have predicted a rate hike before June. The survey also showed that economists expect the BoJ to raise interest rates once again. The survey lacks a clear consensus on the exact moment when the rise would occur.

Meanwhile, the Euro depreciates relatively against other currencies, as the European Central Bank (ECB) is expected to cut interest rates at its June meeting. Villeroy de Galhau, head of monetary policy at the ECB, declared last week that rates could be lowered at the next meeting, barring a major surprise. Villeroy emphasized returning to structural transformation, since inflation is receding.

Likewise, ECB Joachim Nagel stated at Wednesday's European session that an interest rate cut in June may not necessarily be followed by a series of rate cuts. The statement clearly indicates that he is comfortable with a rate cut move in June.