The Pound Sterling to Japanese Yen (GBP/JPY) and US Dollar to Japanese Yen (USD/JPY) exchange rates registered gains on Wednesday as investors digested the latest Bank of Japan (BOJ) meeting minutes. Policymakers expressed concern in the minutes that the inflation target wouldn’t be met within the 2017 fiscal year. However, policymakers were in agreement that long-term inflation progress was looking hopeful. With board members having little control over persistently low inflation and weak consumer spending, the BOJ could introduce further stimulus in the next year to help encourage economic growth.
BOJ Deputy Governor Kikuo Iwata commented on the ‘somewhat delayed’ progress towards the central bank’s inflation target, saying: ‘At this moment, the BOJ has no intention of changing its commitment of achieving its price target at the earliest possible time.’
Iwata went on to discuss the impact of lower fuel and electricity costs, saying: ‘There’s a risk that if prices continue to fall for a long period of time, that will affect inflation expectations… The risk of that happening is small for now but we can’t rule this out completely.’
Despite the fall in consumer prices, Japan’s retail sales are still weak, with March recording a -9.7%contraction on the year. Meanwhile, Japanese Small Business Confidence rose from 47.4 to 48.1 in May, bypassing the 48.0 forecast. However, the upbeat ecostat wasn’t enough to prevent the US Dollar rallying to eight-year highs versus the Japanese Yen (USD/JPY). The USD/JPY exchange rate reached 123.09 as investors priced in the possibility of a Federal Reserve interest rate hike this year after upbeat US data emerged.
Thursday could be an interesting day for the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate with the release of UK Gross Domestic Product (GDP) figures. GDP growth is forecast to reach 2.5% in Q1 on the year which could see Sterling rally. Despite the pessimism hanging over the Yen at the moment, it’s possible the Japanese currency could gain some support as a safe-haven asset if the situation in Greece unfolds badly. The Swiss Franc (CHF), another safe-haven currency, has been rising against other majors as investors attempt to forecast the possibility of a Greek exit (Grexit) from the Eurozone. Any hint of a Greek default which could see the nation leave the currency bloc could allow the Yen to rise significantly. The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is presently trending in the region of 189.60.