GBP/JPY Exchange Rate Steady, Goldman Sachs Predicts 25% Economic Contraction for Japan
The Pound to Japanese Yen (GBP/JPY) exchange rate held steady this morning, with the pairing currently trading around ¥134.071.
The Japanese Yen (JPY) shed some of its gains today after Goldman Sachs said that Japan’s economy was heading towards a record contraction of 25%.
This follows Prime Minister Shinzo Abe’s declaration of a month-long state of emergency to tackle the spread of the coronavirus in Tokyo, Osaka and other parts of the country.
Japan now has over 3,906 confirmed cases, with 1,116 cases confirmed in Tokyo’s metropolitan region of 14 million people.
Consequently, the Japanese Yen has suffered from the government’s announcement of a lockdown as the Japanese economy is now expected to suffer.
Japanese President Abe said in a televised news conference:
‘We are not at a stage where rapid nationwide spread is being observed, but some areas are under pressure, so we don’t have the luxury of time.’
‘To relieve that pressure there will have to be a transformation in people’s behaviour. Preventing an explosion in cases, saving people in serious conditions and protecting you and your loved ones depends on how we change our behaviour.’
The Japanese Yen (JPY) has also suffered from shrinking safe-haven demand as Europe’s coronavirus cases continue to dwindle.
Pound (GBP) Struggles as ‘Political Vacuum’ Fears Haunt UK Markets
The Pound (GBP) failed to make much headway against the Japanese Yen (JPY) today as Prime Minister Boris Johnson remains in intensive care, with reassurances from Downing Street that his condition remains ‘stable’.
Dominic Raab, the UK Foreign Secretary, commented:
‘[Boris Johnson’s] receiving standard oxygen treatment and breathing without any assistance, he’s not required any mechanical ventilation or non-invasive respiratory support. He remains in good spirits and in keeping with usual clinical practice his progress continues to be monitored closely in critical care.’
However, with Dominic Raab now deputising for the Prime Minister, there are rising fears of a potential political vacuum being formed in the heart of the British government. Consequently, the Pound remains unappealing today as uncertainty hangs over the UK’s political infrastructure.
According to Sir Patrick Valance, the Chief Adviser to the British Government, the UK’s coronavirus developments ‘could be moving in the right direction’. Meanwhile, BBC’s Head of Statistics, Robert Cuffe, said there was beginning to emerge a ‘silver lining to these grim figures’.
With a glimmer of hope now emerging over the nation’s coronavirus crisis, we could see the Pound begin to edge higher against some of its peers.
GBP/JPY Forecast: Boris Johnson’s Health in Focus
Japanese Yen (JPY) traders will be awaiting tomorrow’s speech from the Bank of Japan’s Governor, Haruhiko Kuroda. Any downbeat comments about the Japanese economy – particularly now that it faces a lockdown and state of emergency – would prove JPY-negative.
Sterling traders, meanwhile, will be looking ahead to tomorrow’s manufacturing and industrial production reports for February. If both sectors show a downturn even before the coronavirus took hold of the British economy, we could see GBP being compromised
The GBP/JPY exchange rate will, however, continue to be driven by news concerning Boris Johnson’s health. Any signs of improvement in the PM’s condition would bolster confidence in the Pound as the UK’s political arrangements slowly return to normal functioning.