British Pound weakens against Japanese Yen amid hawkish BoJ prospects
- GBP/JPY declines to near 216.85 as the Japanese Yen trades firmly.
- The BoJ is expected to raise interest rates at the September meeting.
- Investors await the Tokyo CPI data for July, which will be released on Friday.
The British Pound (GBP) is under pressure against the Japanese Yen (JPY) on Wednesday, trading 0.22% lower at around 216.85 during the European trading session. The cross weakens as the Japanese currency strengthens, with financial markets pricing in an interest rate hike by the Bank of Japan (BoJ) in its policy meeting next month.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.10% | -0.13% | 0.14% | -0.23% | 0.38% | 0.24% | |
| EUR | -0.03% | 0.07% | -0.15% | 0.11% | -0.25% | 0.36% | 0.21% | |
| GBP | -0.10% | -0.07% | -0.22% | 0.04% | -0.32% | 0.29% | 0.14% | |
| JPY | 0.13% | 0.15% | 0.22% | 0.26% | -0.10% | 0.52% | 0.36% | |
| CAD | -0.14% | -0.11% | -0.04% | -0.26% | -0.37% | 0.26% | 0.10% | |
| AUD | 0.23% | 0.25% | 0.32% | 0.10% | 0.37% | 0.63% | 0.46% | |
| NZD | -0.38% | -0.36% | -0.29% | -0.52% | -0.26% | -0.63% | -0.16% | |
| CHF | -0.24% | -0.21% | -0.14% | -0.36% | -0.10% | -0.46% | 0.16% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Japan data underpins BoJ tightening bets as JPY firms against soft USD
Strategists at Scotiabank highlight that Japan’s July inflation figures maintained the recent upward trend, noting that “Japan’s July CPI rose to 1.9% in the year, in line with expectations, extending the steady pick-up in prices seen since February.” They add that the latest “inflation data added marginally to conviction that the BoJ will tighten next month, with 20bps or hikes reflected in swaps."
The August 17-24 Reuters poll released earlier in the day also showed that 57% of economists expected the BoJ to raise its interest rates by 25 basis points (bps) to 1.25% in September. This is a sharp turnaround from a July poll when just 5% expected an interest rate hike move.
This week, investors will pay attention to the Tokyo Consumer Price Index (CPI) data for August, which will be released on Friday. The inflation data is expected to influence BoJ interest rate expectations. Tokyo CPI ex. Fresh Food is seen growing at a moderate pace of 1.7% Year-on-Year (YoY) against the July reading of 1.9%.
Meanwhile, the British Pound reflects a mixed performance against its peers in the European session. Going forward, the major trigger for the British currency will be market expectations for the Bank of England’s (BoE) monetary policy outlook.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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