The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was trading softly on Monday, with session highs of 178.2100 and lows of 177.1700 after Japan’s Tertiary Industry Index rose by 0.3% in February. Economists had expected a -0.7% contraction after January’s 0.7% gain and therefore the Japanese currency was offered some support on the surprising ecostat.
The Tertiary Industry Index is used to gauge the monthly change in service sector output and usually has a moderate influence on the Japanese Yen exchange rate.
Friday had seen the JPY/GBP currency pair remain in a relatively tight range after the Japanese Consumer Confidence Index had risen from 40.7 in February, above the 41.3 forecast to hit 41.7 in March. The GBP/JPY exchange rate closed at 177.8346 GMT on Friday.
Last week also saw the Bank of Japan (BoJ) make the decision to continue with the large-scale stimulus programme it expanded in October 2014—a surprise move from the central bank.
BoJ Governor Haruhiko Kuroda remained upbeat in a speech on Sunday, suggesting that ‘there is no doubt that the underlying trend of inflation has improved markedly.’
Japan has suffered with years of low deflation and drastic tactics have been employed in an attempt to revive the economy and escape the downward spiral.
Kuroda suggested that the current monetary policy is having the ‘intended effects and the economy is making steady progress in conquering low inflation.’
Inflation has been a problem for economies the world over, with oil prices taking a near 60% tumble since last July; however, Japan also has the added factor of the April 2014 sales tax increase which weighed on consumer price inflation.
The Japanese Yen could be in for an interesting few weeks as investors and economists speculate whether the Bank of Japan is likely to expand the monetary programme again in its April 30th meeting.
Wednesday could be another day for Japanese Yen exchange rate movement with the release of the Japanese Merchandise Trade Balance. Import and export figures will accompany the publication and detail how Japanese international sales are faring.
Friday will be another exciting day for the Yen when the Japanese Small Business Confidence figure emerges. The March ecostat resided just below the 50.0 benchmark which separates expansion from contraction at 49.8.
If the April ecostat manages to climb over the 50.0 line into expansion territory, the Yen could be offered some considerable support.
Also out on Friday is the Japanese All Industry Activity Index which is expected to record -1.0% contraction in February after January’s 1.9% gain.
Bank of Japan Deputy Governor Hiroshi Nakaso will also be speaking and could have a further impact on the way the Yen trades.
Nakaso recently warned the foreign exchange market on betting on monetary policy expansion, advocating that a cut in the bank’s inflation forecasts alone wouldn’t qualify further monetary easing.
Nakaso stated: ‘What’s important is the underlying trend of inflation dynamics, which are steadily improving. As long as there’s no change to the underlying trend of inflation, additional monetary easing is unnecessary.’
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is currently trading at 177.6000.