The EUR/JPY FX cross rate printed at 132.64 yen per euro at the close on Friday, down 0.25% from the previous close, after the Bank of Japan (BOJ) kept its monetary policy on hold despite cutting its economic forecasts and saying they did not expect to hit its 2% inflation target until the start of 2017. In the policy statement, the bank downgraded its growth forecast for the current fiscal year ending in March, to 1.2% from 1.7% and its inflation, ex-fresh food, forecast to 0.1% from 0.7%.

The BOJ decision came on the heels of the U.S. Federal Reserve announcement to keep rates on hold, after Wednesday's Federal Open Market Committee (FOMC) meeting. The Fed issued a somewhat hawkish policy statement, hinting of a rate hike at the next FOMC meeting on December 15-16. From the statement, the Fed seems to be determined to hike the rate this year even though they admit that the pace of job gains has slowed. 

Last week, the European Central Bank (ECB) also left key interest rates unchanged at 0.05% after its Governing Council meeting in Malta. ECB President Mario Draghi said in a press conference that the bank will re-examine whether to extend its 1.1 trillion euro bond-buying program at its December 3 meeting. Mr. Draghi, however, sees downside risks to growth and the inflation outlook.

The European statistics agency Eurostat said on Friday that the eurozone consumer price index (CPI) returned to zero in October, in line with forecasts, after falling 0.1% in September from a year earlier. The statistics agency also estimated the unemployment rate was 10.8% in September, down from August's 10.9%, in the 19 countries that use the euro.

Japan’s economy desperately needs help, as it contracted 0.3% in the second quarter, meaning another quarterly fall would put Japan back into recession. The Ministry of Economy, Trade and Industry said on Wednesday that retail sales fell 0.2% in September from a year earlier, compared with economists' median estimate for a 0.4% increase. Japanese household spending is in the tank, as it fell 0.4% in September from a year earlier in price-adjusted real terms, missing the median estimate of a 1.2% increase in a Reuters poll of economists.

From our technical viewpoint, the EUR/JPY hit the lower trendline resistance of the symmetrical triangle chart patterns in April, as the Greek debt crisis and the ECB quantitative easing program put selling pressure on the euro. The downward pressure on the euro against the Japanese yen was also attributed to the global central banks adding the yen to their holdings, in order to keep the ratio of Japan’s currency constant in dollar terms, as the yen tumbled against the greenback at the end of 2014, according to Bloomberg. 

Since mid-August, the Japanese yen has been strengthening as a safe-haven against other major currencies during the turmoil in the global financial markets. The currency pair is now falling back to the lower trendline resistance of the symmetrical triangle again and is about to break down. 

Japan’s economy, which shows no sign of significant improvement in growth and inflation outlook, seems to be irrelevant to the EUR/JPY until the ECB Governing Council meeting on December 3 in Frankfurt. Things can change if the BOJ decides that there is a need for more stimulus at its next meeting on November 18-19.