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Pound Sterling to Japanese Yen Exchange Rate Climbs as Investors Expect Cautious Bank of Japan (BoJ)

Japanese Yen Currency Forecast

Pound to Japanese Yen Exchange Rate Fails to see Notable Boost on UK Budget News

While the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has been edging higher this week so far, this has been more due to a lack of demand for the Japanese Yen (JPY) as Sterling (GBP) has also been unappealing amid persistent Brexit jitters.

Following last week’s plummet of over 3 Yen, from 147.02 to 143.44, GBP/JPY has edged higher again. GBP/JPY gains have been modest, but the pair has climbed around half a cent to trend near the level of 144.17 this morning.

Despite market appetite for safe haven currencies, the safe haven Japanese Yen’s strength has been limited by persistent strength in its rival, the US Dollar (USD), as well as market caution ahead of this week’s Bank of Japan (BoJ) policy decision.

The BoJ is expected to leave monetary policy frozen, but is also expected to slightly cut its forecasts.

The Pound’s gains have been largely due to Japanese Yen weakness, but its gains have been limited and Monday’s UK Budget Statement did little to change that.

Pound (GBP) Exchange Rate Strength Modest as UK Budget Fails to Quieten Brexit Fears

Monday saw the UK Treasury hold its 2018 Autumn Budget Statement, and the government’s smaller focus on austerity going forward was the main takeaway for headlines.

The UK Treasury also slightly upgraded its UK growth predictions despite the imminence of the Brexit process and a lack of any confirmed UK-EU Brexit deal as of yet.

Investors generally chose to brush over the Budget news, as the Brexit process was largely ignored and as a result the event did little to ease fears about the possibility that UK-EU Brexit negotiations could fall through.

Investors are still highly anxious about the possibility of a worst-case scenario ‘no-deal Brexit’.

According to Simon Derrick, Chief Currency Strategist at BNY Mellon:

‘Since the October 17 EU summit…renewed outflows have begun to emerge as investors have become steadily more concerned about the lack of agreement between the EU and UK on the divorce deal,’

Japanese Yen (JPY) Exchange Rates Lack Appeal as Investors Anticipate Bank of Japan (BoJ)

Investors have sold the Japanese Yen slightly versus its biggest rivals so far this week, as last week’s safe haven surge cools and investors have relatively bearish expectations for the Bank of Japan’s (BoJ) October policy decision tomorrow.

Economists expect the Bank of Japan will leave monetary policy frozen, but will also slightly downgrade some projections amid a lack of signs of stronger growth or inflation.

According to analysts at Bank of America Merrill Lynch:

‘We expect the Bank of Japan to leave policy on hold at its 31 October meeting. The policy board will likely revise down slightly its macro forecasts; continued downside risks to growth and inflation mean rate hikes are a long ways off,’

On top of this, the Yen has been weaker as Japanese investors have been focusing on offshore equities in recent weeks.

Pound to Japanese Yen (GBP/JPY) Exchange Rate Could Climb Higher if Bank of Japan (BoJ) Disappoints

The Pound to Japanese Yen (GBP/JPY) exchange rate is unlikely to see much of a significant boost in demand any time soon amid a lack of developments in UK-EU Brexit negotiations.

However, the Pound could still benefit from Japanese Yen weakness in the coming days, especially if upcoming Japanese news and data disappoints investors.

Wednesday will see the publication of Japan’s September industrial production results and October consumer confidence figures.

The main focus of the day will be on the Bank of Japan’s (BoJ) October policy decision. If the bank is even more cautious or even dovish about Japan’s economy than expected, the Pound to Japanese Yen exchange rate could climb.

UK consumer confidence data from Gfk will be published too, and could slightly boost Pound strength if it is particularly impressive.

Overall though, potential developments in UK politics or the Brexit process are much more likely to influence the Pound to Japanese Yen (GBP/JPY) exchange rate outlook than UK data is.