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Pound Japanese Yen (GBP/JPY) Exchange Rate Falls as Japanese Economy Rebounds

GBP/JPY Exchange Rate Sinks as Hopes Grow for Japanese Econoy

The Pound to Japanese Yen (GBP/JPY) exchange rate fell by 0.4% today following the publication of the Japanese industry index for June, which beat forecasts and rose by 2.3%. The pairing is currently fluctuating around ¥151.297.

As a result, the Japanese Yen has benefited from growing confidence in the Japanese economy, thanks to a mixture of positive economic data and easing of lockdown restrictions.

Japan’s economy recovered in the second quarter thanks to the easing of lockdown restrictions and a flurry of consumer activity.

Following a 0.9% drop in the first quarter, the economic output expanded by 0.3% in the second quarter.

Nevertheless, some analysts are more cautious about the outlook for the Japanese economy.

Yoshiki Shinke, the chief economist at Dai-ichi Life Research Institute, said:

‘There’s not much to be optimistic on the outlook, with a spike in infections heightening the chance of stricter curbs on activity.

‘Japan’s economy stagnated in the first half of this year and there’s a risk of a contraction in July-September. Any clear rebound in growth will have to wait until year-end.’

However, for now growing confidence in the Japanese economy has helped to buoy the JPY/GBP exchange rate.

Pound (GBP) Exchange Rate Sinks Despite Rebound in UK Jobs Sector

The Pound (GBP) fell against JPY today despite signs of a recovering UK labour market, with a record rise in job vacancies promising more employment opportunities going forward.  

Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, explains:

‘Most public sector workers likely will see modest increases in their pay again next year, while job losses in the wake of the furlough scheme will help to keep a lid on private-sector settlements.

‘Accordingly, we continue to think that the labour market will lose its current momentum, enabling the monetary policy committee to wait until the first half of 2023 to raise [interest rates].’

Added to this, the UK has seen a rise in coronavirus cases, and with infections and hospitalisations forecast to rise in autumn, many Pound investors have remained cautious about the economic outlook.

GBP/JPY Exchange Rate Forecast: UK Inflation Data in Focus

Japanese Yen (JPY) traders are looking ahead to tomorrow’s trade data for July. Could an improvement in exports figures see the JPY/GBP exchange rate head higher?

Meanwhile, GBP investors will monitor the latest UK inflation data for July.

Any signs of improvement in the outlook for the UK economy would be Pound-positive.

However, if Covid-19 cases continue to rise throughout Britain, the GBP/JPY exchange rate would suffer.