Pound Climbs Against Japanese Yen (GBP/JPY) Despite Upbeat Japanese Data

Modified: Thursday, 12 February 2015 22:33 BST - Written by Tim Boyer

STORY LINK Pound Climbs Against Japanese Yen (GBP/JPY) Despite Upbeat Japanese Data

The Pound registered gains against the Japanese Yen after the Bank of England released its latest inflation report. However, the Yen was initially offered some support on Thursday when Japanese Machine Orders rose by 8.3% in December on the month. As a result of the monthly increase, the year-on-year ecostat rose from the depths of contraction at -14.6% to 11.4%. Industry expert Norio Miyagawa commented: ‘Corporate earnings have been good recently, and companies are starting to use some of these earnings to increase capital expenditure. This is also a sign that domestic demand is going well. You could say that the economy is headed in a direction that is favourable for the BOJ and the government.’

The Bank of Japan also offered the Yen strength when it stated that the use of any additional stimulus measures in the current climate would be counterproductive. The Japanese economy has undergone many years of quantitative easing—a result of a persistent deflation problem. However, the central bank’s comments on Thursday offered hope that policy may be changing (perhaps for a more radical concept) to encourage growth in the Japanese economy. The statement came in direct opposition to the general consensus that the central bank would continue to loosen monetary policy. Industry expert Kit Juckes commented: ‘Anything that suggests (the BOJ) is OK with the Yen here, and don’t want it still weaker, likely means that it appreciates. BOJ policy isn’t quite so extraordinarily easy relative to the rest of the world as it was.’

Thursday is yet to see the release of Japanese Buying Foreign Bonds and Stocks stats which could have a moderate effect on the Yen. However, Friday will be a data-free day for the Japanese nation, leaving a lot of the Yen’s movement up to the impact of global developments. Meanwhile, Pound fluctuations may be limited amid a quiet end to the week by way of domestic data. The UK currency experienced movement as a result of the Bank of England’s inflation statement and climbed despite the UK House Price Balance growing less than expected in January. The balance rose by 7% in January rather than the 12% economists had predicted. UK construction Output stats will be made available during Friday’s trading and could impact the Pound mildly. Economists have estimated a 2.7% rise in December after November’s -2.0% contraction. In addition, the annual figure has been pegged to increase from 3.6% to 5.5%.

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