Ella 
The euro/Japanese yen (EUR/JPY) currency pair has experienced a significant decline in recent months, with the euro losing ground against the Japanese yen. This trend has raised concerns among investors who are looking for answers as to why this is happening and what it means for the global economy.
In this article, we will explore the reasons why the EUR/JPY currency pair is falling, analyze the impact of this trend on the global economy, and assess the potential future outlook for this pair.
Global Economic Uncertainty
One of the key factors contributing to the fall in the EUR/JPY currency pair is global economic uncertainty. The COVID-19 pandemic has had a significant impact on the world economy, causing widespread disruption and uncertainty. As a result, investors have been searching for safe-haven assets, such as the Japanese yen, which is considered a stable currency.
The European Union has also faced economic challenges, including low inflation rates and sluggish economic growth. These issues have weighed heavily on the euro, making it less attractive to investors. As a result, the demand for the Japanese yen has increased, leading to a decline in the EUR/JPY currency pair.
Divergent Monetary Policies
Another factor contributing to the fall in the EUR/JPY currency pair is divergent monetary policies between the European Central Bank (ECB) and the Bank of Japan (BOJ). The ECB has implemented a policy of negative interest rates and quantitative easing to stimulate economic growth and inflation. In contrast, the BOJ has maintained a policy of low interest rates and continues to purchase Japanese government bonds.
These divergent monetary policies have led to a decrease in the value of the euro relative to the yen. The negative interest rate policy pursued by the ECB has reduced the yields on European bonds, making them less attractive to investors. As a result, investors have shifted their attention to the Japanese bond market, leading to an increase in demand for the yen and a decline in the EUR/JPY currency pair.
Trade Tensions
Trade tensions between the European Union and Japan have also contributed to the fall in the EUR/JPY currency pair. The ongoing trade dispute between the United States and China has created uncertainty in the global economy, leading to a slowdown in international trade. As a result, both the European Union and Japan are looking to diversify their markets and reduce their reliance on exports to the United States and China.
The European Union has imposed tariffs on Japanese steel imports, while Japan has responded with tariffs on European cheese and wine. These trade tensions have reduced the demand for European goods in Japan and vice versa, leading to a decrease in the value of the euro relative to the yen.
Impact on the Global Economy
The fall in the EUR/JPY currency pair has implications for the global economy. A stronger yen makes Japanese exports more expensive, which could lead to a slowdown in the country’s export-driven economy. This could also have a knock-on effect on other economies that rely on exports to Japan.
In contrast, a weaker euro could provide a boost to European exports, making them more competitive in global markets. This could help to stimulate economic growth in the European Union, which has struggled with sluggish growth in recent years.
However, the fall in the EUR/JPY currency pair could also have negative implications for the global economy. The increased demand for the yen as a safe-haven asset could lead to an appreciation of the currency, which could make Japanese goods less competitive in global markets. Additionally, a weaker euro could lead to a decrease in inflation rates, which could make it more difficult for the ECB to achieve its inflation target.
Future Outlook
Looking ahead, the future outlook for the EUR/JPY currency pair is uncertain. The ongoing COVID-19 pandemic and the associated economic uncertainty could continue to weigh on both the euro and the yen. However, there are also signs of a potential economic recovery in the European Union and Japan, which could lead to increased demand for both currencies.
The resolution of trade tensions between the European Union and Japan could also lead to an improvement in the EUR/JPY currency pair. Additionally, any changes in monetary policy by either the ECB or the BOJ could have a significant impact on the value of the euro and the yen.
Conclusion
The fall in the EUR/JPY currency pair can be attributed to a range of factors, including global economic uncertainty, divergent monetary policies, and trade tensions. This trend has implications for the global economy, including potential impacts on export-driven economies and inflation rates.
Looking ahead, the future outlook for the EUR/JPY currency pair is uncertain, with both positive and negative factors at play. Investors should closely monitor economic developments and policy decisions from the ECB and BOJ to assess the potential future direction of this key currency pair.
