EUR/JPY trades around 165.00 after retreating from seven-month highs

• EUR/JPY depreciates as the Japanese Yen trims its daily losses.
• Japanese Finance Minister Kato said that he will appropriately conduct fiscal policy to attract domestic investors.
• The ECB revised down its inflation projections for 2025 and 2026, signaling that its current easing cycle is nearing conclusion.

EUR/JPY pulled back from a fresh seven-month high of 165.45, trading around 165.10 during the Asian hours on Tuesday. However, the currency cross gained ground as the safe-haven Japanese Yen (JPY) received downward pressure amid a cooling down in the United States' (US) latest broad tariff tensions with China.

US and Chinese advisors are set to continue meeting on a second day on Tuesday at 10.00 a.m. in London. Trade talks will continue as the world's two largest economies look to ease tensions over shipments of technology and rare earth elements, per Bloomberg. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick both noted positive comments about the meeting held on Monday.

On Monday, data showed that Japan's economy contracted at a slower pace than initially estimated, by 0.2% annualized during the first quarter of 2025, reaffirming market bets that the Bank of Japan (BoJ) will continue normalizing rates amid sticky inflation.

Japanese Finance Minister Katsunobu Kato said on Tuesday that he will appropriately conduct fiscal policy to prompt domestic investors to buy more Japanese Government Bond holdings. Kato also emphasized that the government to make efforts to ensure a variety of investors buy and own government bonds, at a time when the BoJ tapers its bond purchases.

In the Eurozone, the European Central Bank (ECB) delivered a 25 basis point rate cut last week, bringing borrowing costs to their lowest since November 2022. Moreover, the central bank also revised down its inflation projections for 2025 and 2026, indicating that it is nearing the end of its current easing cycle.