Pound Sterling Japanese Yen Exchange Rate News: GBP/JPY Firms as Japanese Inflation Comes Up Short

GBP/JPY Exchange Rate Lifted by Weak Japanese Inflation

The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is pushing higher as markets react to Japan’s latest inflation figures.

At the time of writing the GBP/JPY exchange rate is up 0.3% from this morning’s opening levels, placing the pairing at a new two-week high.

Japanese Yen (JPY) Exchange Rates Softened by Lacklustre Inflation Reading

The Japanese Yen (JPY) is trending lower against the Pound (GBP) and the majority of its other peers this morning, following the publication of Japan’s latest Consumer Price Index (CPI)

Japan’s CPI reading revealed that core inflation stalled at 0.8% in the twelve months to July, falling short of the rise to 0.9% that had been forecast and leaving inflation well below the Bank of Japan’s (BoJ) target rate of 2%.

Marcel Thieliant, senior Japan economist at Capital Economics, said:

‘Consumer price gains remain driven by volatile fresh food and energy inflation while underlying inflation remains subdued.

‘Price pressures should strengthen ahead of next year’s sales tax hike but inflation is set to remain well below the BoJ’s 2 percent inflation target.’

Price growth remains stubbornly low in Japan despite significant efforts from the BoJ to simulate inflation and looks set to complicate any attempts by the BoJ to extract itself from its current ultra-loose monetary policy any time in the foreseeable future.

Pound Sterling (GBP) Exchange Rates Dented by Brexit Concerns

While the Pound (GBP) may be holding its ground against the Japanese Yen (JPY) this morning, its performance against the rest of its peers leaves something to be desired.

This comes after Sterling sentiment was dealt a heavy blow on Thursday with the release of the UK government’s no-deal Brexit papers.

The paper outlined how individuals and businesses could be impacted should the UK crash out of the EU without a deal next year and made for pretty bleak reading for markets.

Adam Marshall, Director General at the British Chambers of Commerce, said:

‘Ministers say they will take unilateral steps to keep trade moving freely but must demonstrate what they will concretely do to limit the impact of delays, inspections and red tape.

‘It is unfortunate that businesses face several weeks wait for further information and clarification.

‘Every additional delay means less time for businesses to prepare ahead of the UK’s fast-approaching exit from the EU.’

On top of this GBP investors were further spooked by a letter published by Chancellor Philip Hammond warning that a no-deal Brexit could damage the UK economy, with GDP potentially taking a 7.7% hit over the next 15 years.

GBP/JPY Exchange Rate Forecast: Brexit to Remain in Focus Next Week?

Looking ahead to next week’s session an absence of any notable UK data is likely to see movement in the Pound Japanese Yen (GBP/JPY) exchange rate continue to be dominated by Brexit.

This could see Sterling sentiment continue to come under fire unless some positive progress begins to be made in Brexit negotiations.

Meanwhile the focus for JPY investors next week is likely to be on Japan’s latest labour report, with the Japanese Yen likely to stumble should Japans unemployment unexpected rise again last month as it did in June.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron