EUR/JPY advances as Yen falters on fiscal concerns, Eurozone yield gap

• The Japanese Yen continues to weaken as markets worry about Japan's fiscal situation.
• Investors await Japan's national inflation figures, which could influence the BoJ's next steps.
• Stable interest rates in the Eurozone widen the yield gap in favor of the Euro.

EUR/JPY rises on Thursday to around 177.00 at the time of writing, up 0.30% for the day. The cross is rebounding amid broad weakness in the Japanese Yen (JPY), as concerns over Japan's public finances weigh on the currency. The recent appointment of Sanae Takaichi as Prime Minister, seen as a fiscal dove favoring expansionary policies, has intensified fears over the sustainability of Japan's public debt.

According to a government document cited by Reuters, Japan's cabinet is preparing a stimulus package worth around USD 90 billion to offset the impact of rising prices on households. This new plan would follow a similar one approved last year and could further strain already fragile public finances. These developments have pressured the Japanese Yen, as investors worry that loose fiscal policy may delay the Bank of Japan's (BoJ) monetary tightening path.

Meanwhile, markets are awaiting the release of Japan's national Consumer Price Index (CPI) for September later on Thursday. A stronger reading could lend some support to the JPY by reinforcing expectations of another rate hike by the BoJ before year-end.

In Europe, European Central Bank (ECB) Vice President Luis de Guindos said that inflation risks in the Eurozone are now balanced, emphasizing that current interest rate levels remain appropriate. This cautious stance, combined with the Japanese Yen's weakness, supports EUR/JPY's upward move as yield differentials continue to favor the Euro.