I've been observing the euro-yen for a while, and honestly, 2025 was quite a busy year for this pair. It started around 161.7 yen per euro, plummeted to 155.6 in February when the US tariffs issue arose, and then rebounded to 164.2 in May. So far in 2026, the movement has been less dramatic but just as interesting.

What catches my attention most is how the yen continues to behave as a safe haven whenever market tensions rise. When fear appears, people buy yen without hesitation. The Bank of Japan raised rates to 0.50% in January 2025 (the highest level since 2008) and kept tightening throughout the year. Meanwhile, the ECB was doing the opposite: lowering rates because the eurozone was cooling down. That completely changed the interest rate differential.

The key to euro-yen is that the interest rate differential between Japan and the eurozone continues to narrow. A couple of years ago, financing in yen to buy euros made a lot of sense. Now, that margin is so small that it no longer justifies the risk. This structurally favors the yen. Additionally, the yen market is huge and super liquid, making it easy to enter or exit quickly when something explodes.

What happened with US tariffs in February was brutal for euro-yen: the pair dropped straight to 155.6 because everyone sought refuge. But when Beijing injected stimulus in May, markets relaxed, and euro-yen rose to 164.2. That shows how sensitive this cross is to geopolitical shocks rather than interest rate differentials.

Looking ahead, euro-yen will probably fluctuate within a fairly wide range. When risk appetite returns, it could hit 165-170 yen. But if another scare appears (strong US inflation, new tariffs, stock market correction), the yen may act again as a refuge, pushing the pair to 158-160. My feeling is that the bias favors a somewhat stronger yen this year, so levels of 160-162 in euro-yen could be good opportunities to build positions.

If someone wants to establish a yen position, it’s prudent to do so gradually on rebounds toward 165-170, aiming for 160-162 as a target. The main risk is that the BoJ surprises with a pause if inflation subsides, or that something in Europe pushes inflation higher. But the structural trend of euro-yen seems clear: the yen has tailwinds.