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Pound Japanese Yen (GBP/JPY) Exchange Rate Falls as BOJ Scrutinises ‘Overseas Uncertainties’

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Edges Lower as BOJ Leave Rates Unchanged

The Sterling Japanese Yen (GBP/JPY) exchange rate edged down today, and the pairing is currently trading at around ¥140.0860.

On Thursday, the Bank of Japan (BOJ) left rates unchanged as markets expected, but gave the strongest signal to date that the bank is likely to cut rates in the future.

The central bank Governor, Haruhiko Kuroda said the BOJ still had room to take the already negative rates lower in order to prevent global uncertainties from damaging the Japanese economy.

Speaking at a news conference after the bank’s decision, Kuroda said:

‘The chance of the economy losing momentum to hit our price [inflation] target hasn’t escalated. But we need to scrutinise developments as overseas uncertainties are heightening.

‘It’s still possible for the BOJ to deepen negative rates.’

Meanwhile, the US Federal Reserve cut rates for the third time this year, but signalled there would be a pause in cuts unless the economy took a turn for the worse.

Commenting on this, Totan Research chief economist, Izuru Kato said:

‘The BOJ doesn’t have many tools left to ease policy so it probably wanted to save them for now, particularly with fading expectations of a Fed rate cut seen keeping Yen rises at bay.

‘If risks do not heighten enough to prod the Fed to ease in December, the BOJ could hold off on action that month as well’

Pound (GBP) Slips as Brexit Pessimism Weighs on Consumer Confidence

Sterling edged lower against the Japanese Yen as MPs began preparations for the first December general election in close to a century.

The Pound was left flat as markets assessed the risk associated with an early election, although many investors believe the Conservatives will retain power.

Commenting on this, Derek Halpenny, MUFG’s European head of global research, said:

‘Johnson has cross-party support and [the opposition] Labour Party has lost a fair lot of the credibility it had in the 2017 election.

‘So that’s reflected in the stability in Sterling – markets believe the Conservative party will hold on to power and have a Brexit deal agreed with the EU.’

Meanwhile, GBP sentiment was left under pressure as the country’s longest-running measure of consumer confidence fell to its joint-lowest since 2013 thanks to Brexit pessimism.

While British consumers have remained upbeat since the 2016 Brexit referendum, recent weeks saw morale soften, which does not bode well for spending in the run up to Christmas.

Pound Japanese Yen Outlook: Will Weak Manufacturing Leave GPB/JPY Flat?

Looking ahead to Friday, the Japanese Yen (JPY) could slump against the Pound (GBP) following the release of the Jibun Bank manufacturing PMI.

If October’s PMI slumps further into contraction territory, it is likely this will cause Yen sentiment to slide.

Meanwhile, weak UK manufacturing data could leave Sterling under pressure, and leave the pairing flat at the end of the week.

If the UK manufacturing PMI slides further than expected into contraction in October, it is likely the Pound Japanese Yen (GBP/JPY) exchange rate will be left muted.