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Pound to Japanese Yen (GBP/JPY) Exchange Rate Steady as Japan’s Economic Outlook Darkens

April 24, 2020 - Written by John Cameron

GBP/JPY Exchange Rate Rangebound as Japanese Economy Faces ‘Severe Situation’

The Pound to Japanese Yen (GBP/JPY) exchange rate held steady today, with the pairing currently trading around ¥132.93.

The Japanese Yen (JPY) has been increasingly pressured by fears over the Japanese economy in April, after the Japanese Government was notably pessimistic in its analysis of the overall situation in its key monthly report.

The Japanese Cabinet Office downgraded its forecasts for the second month in a row, saying in its statement:

The Japanese economy is getting worse rapidly in an extremely severe situation.’

‘[However,] [w]hile the economy is in a difficult situation, the tempo of worsening has become moderate.’

Today saw the release of Japan’s All Industry Activity Index for February, which fell by -0.6%. As a result, Japanese Yen investors are becoming increasingly concerned for the heavily industrialised economy’s health going forward.

Yasutoshi Nishimura, Japan’s Minister for Economic and Fiscal Policy, commented:

‘Our view that the economy has been in a downward phase remains unchanged (from the previous month).’

Pound (GBP) Steady Despite Plummeting UK Retail Sales
The Pound (GBP) struggled to gain on the Japanese Yen (JPY) today after March’s UK Retail Sales fell by a worse-than-expected -5.1%. The UK retail sector has been severely compromised by the Government’s lockdown measures since 23rd March.

Thomas Pugh, an Economist at the consultancy Capital Economics, commented:

‘Clearly there is huge uncertainty as to how deep the downturn proves and how long restrictions remain in place, a fall in the region of 25% in GDP over the next few months seems likely.’

Sterling’s stability most likely owes itself to positive news about Prime Minister Boris Johnson’s health, following his admittance to intensive care later last month.

US President Donald Trump said that Boris Johnson sounds incredible and ‘ready to go’, adding: ‘It’s like the old Boris. Tremendous energy, tremendous drive.’

However, UK Health Secretary Matt Hancock dampened hopes of the Government’s easing of lockdown restrictions easing any time soon.

Mr. Hancock commented:

‘The truth is, it's still too soon, safely, to change those measures. Although the number of people who died yesterday was lower, it was still over 600, so it's still too high.’

GBP/JPY Forecast: Could Sterling Rise on Falling UK Covid-19 Numbers?

Japanese Yen (JPY) investors will be looking ahead to Monday’s release of the Japanese Unemployment Rate figure for March. If this shoots below forecasts even before the coronavirus tool hold of the Japanese economy, then we could see the JPY/GBP exchange rate begin to fall.

The GBP/JPY exchange rate will face further volatility next week as the UK continues its battle with its own coronavirus crisis. However, any signs of decreasing numbers could bolster the Pound on renewed hopes of the nation’s lockdown being eased.

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