EUR/JPY slumps below 171.50 as Bessent criticizes BoJ, Eurozone GDP eyed

• EUR/JPY falls after US Treasury Secretary Scott Bessent criticized the Bank of Japan's approach to inflation.
• The BoJ is expected to drop its reliance on an inflation gauge tied to domestic demand and wages.
• Traders await Eurozone Industrial Production and Q2 Gross Domestic Product data on Thursday.

EUR/JPY depreciates more than 0.5%, trading around 171.50 during the Asian hours on Thursday. The currency cross loses ground as the Japanese Yen (JPY) advances after US Treasury Secretary Scott Bessent criticized the Bank of Japan's (BoJ) stance on inflation. Bessent said that the BoJ is "behind the curve" and needs to hike rates to get price pressures under control. He noted that he will address the issue directly with BoJ Governor Kazuo Ueda.

Japan's central bank is expected to abandon its reliance on an inflation gauge linked to domestic demand and wages, which has so far restrained further tightening. Governor Kazuo Ueda has defended a cautious stance, noting that "underlying inflation" remains below the BoJ's 2% target. However, some board members are pushing to emphasize headline inflation, which stood at 3.3% in June.

However, the EUR/JPY cross gained ground as the Euro (EUR) appreciated, driven by the prevailing anticipation that the European Central Bank (ECB) had ended its easing cycle in July after eight cuts over the past year, leaving borrowing costs at their lowest since November 2022. However, traders still expect another cut before year-end.

The Euro also receives support from the potential for the interest rate differential between the Fed and the ECB. Traders await Eurozone Industrial Production and Gross Domestic Product (GDP) data for the second quarter due later in the day.