EUR/JPY strengthens to near 178.00, traders await German IFO Business Survey data

• EUR/JPY edges higher to around 178.00 in Monday's early European session. 
• Investors are concerned about Japan's fiscal health and the uncertain outlook for further BoJ policy tightening. 
• ECB's Escriva said the current level of rates is appropriate.  

The EUR/JPY cross gains ground near 178.00 during the early European session on Monday. The expectation that Japan's new Prime Minister Sanae Takaichi would maintain expansionary spending policies and resist early tightening weighs on the Japanese Yen (JPY) against the Euro (EUR). Traders brace for the German IFO Business Survey data later on Monday. 

Reports suggest Takaichi may unveil a major stimulus package as soon as next month, potentially exceeding last year's 13.9 trillion yen program aimed at easing inflationary pressures on households. The potential aggressive fiscal expansion under the new government and uncertainty over the Bank of Japan's (BoJ) policy outlook weigh on the JPY and create a tailwind for the pair. 

Meanwhile, the BoJ is broadly expected to hold its interest rate steady at 0.5% at its upcoming policy meeting on Thursday. Traders will closely monitor the guidance from BoJ Governor Ueda following the meeting for fresh impetus. 

On the Euro front, France's Socialist party leader has threatened to bring down Prime Minister Sébastien Lecornu's government by Monday if their budget conditions are not met, Reuters reported on Friday. Olivier Faure, whose party holds a swing vote in the hung parliament, said that he would file a no-confidence bill early next week if billionaires are not forced to pay more tax.  

Earlier this month, Lecornu agreed to suspend an unpopular pension reform so the Socialists could help him survive a no-confidence vote in parliament. Fears of a political crisis in France could undermine the EUR against the JPY in the near term. 

Analysts expect the European Central Bank (ECB) to keep its interest rates unchanged at its policy meeting on Thursday, for the third consecutive time. ECB officials indicated that the current level is appropriate given the inflation outlook. The ECB Governing Council member José Luis Escrivá said on Sunday that he is satisfied with the current settings for borrowing costs.