EUR/JPY breaks below 162.00 as safe-haven demand lifts Yen amid trade uncertainty

• EUR/JPY weakens as the Japanese Yen gains strength, driven by investor demand for safe-haven assets amid escalating global trade tensions.
• US Treasury Secretary Scott Bessent noted that formal trade negotiations with Japan have yet to commence.
• Japanese Finance Minister Katsunobu Kato criticized US tariffs at the G7 summit, describing them as "highly disappointing."

EUR/JPY retraces its recent gains registered in the previous session, trading around 161.90 during the Asian hours on Thursday. The currency cross depreciates as the Japanese Yen (JPY) strengthens, as investors flock to safe-haven assets amid renewed concerns over global trade tensions.

US Treasury Secretary Scott Bessent downplayed hopes for progress on US-Japan trade negotiations, stating that no formal trade talks have begun and no unilateral tariff cuts have been proposed. Adding to the cautious sentiment, the US reportedly told Japan's trade delegation that Tokyo would not receive preferential treatment under the current tariff framework, despite calls for a policy review.

The Bank of Japan's (BoJ) latest Financial System Report, released Wednesday, noted overall financial stability but emphasized the need for vigilance due to risks tied to market fluctuations, especially those related to stockholdings by Japanese banks.

Japanese Finance Minister Katsunobu Kato criticized US tariffs at the G7 meeting, calling them "highly disappointing." Kato emphasized the importance of a free trade regime and stated that exchange rates should be determined by markets, warning that excessive forex moves could harm the economy.

Meanwhile, European Central Bank (ECB) President Christine Lagarde expressed concern over the US tariff hike on EU goods--from 3% to 13%, noting its negative impact on the European outlook. ECB Governing Council member Madis Muller also suggested that interest rate cuts may be necessary if trade tensions further weigh on growth. These dovish comments could pressure the Euro in the short term.