• EUR/JPY gains traction to around 160.70 in Tuesday’s early European session, up 0.49% on the day. 
• Ishiba’s comments undermine the Japanese Yen. 
• ECB’s Lagarde said she is increasingly confident that inflation will ease to its 2% target. 

The EUR/JPY cross extends the rally to near 160.70 during the early European session on Tuesday. The remarks from Japan's incoming Prime Minister (PM) Shigeru Ishiba weigh on the Japanese Yen (JPY). Investors await the Eurozone Harmonized Index of Consumer Prices (HICP) for September for fresh impetus. Also, the European Central Bank (ECB) policymakers Luis de Guindos and Isabel Schnabel are set to speak later on Tuesday. 

The dovish comments from Japan's upcoming Prime Minister Shigeru Ishiba exert some selling pressure on the JPY. Ishiba said that the Bank of Japan's (BoJ) monetary policy must remain accommodative to underpin a fragile economic recovery.

Elsewhere, Japan’s Tankan Large Manufacturing Index showed that overall business conditions for large manufacturing companies remained steady in the third quarter (Q3) of 2024. The headline large Manufacturers' Sentiment Index arrived at 13.0 in Q3 from 13.0 in Q2, matching the expectations. 

On the Euro front, the softer German CPI inflation data triggers the expectation for a 25 basis points (bps) rate cut at the next ECB policy meeting in October. This, in turn, might cap the upside for the shared currency. The ECB President Lagarde noted on Monday that the central bank is increasingly confident that inflation will fall to its 2% target and this will be reflected in its next policy move, hinting yet about a coming interest rate reduction. The markets raise their bets on a reduction in borrowing costs at the October meeting after Lagarde's speech.