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Pound to Japanese Yen (GBP/JPY) Exchange Rate Soars as Japan Enters ‘Full-Blown Recession’

May 19, 2020 - Written by John Cameron

GBP/JPY Exchange Rate Rises on Japan’s Economic Woes

The Pound to Japanese Yen (GBP/JPY) exchange rate soared by 0.9% today, with the pairing currently trading around ¥130.752.

The Japanese Yen (JPY) has continued to struggle as Japan’s economy fell into a recession for the first time since 2015. Sunday saw the world’s third-largest economy shrink at the annual pace of 3.4% in the first three months of 2020.

Yuichi Kodama, the chief economist at Meiji Yasuda Research Institute, commented:

‘It's near certainty the economy suffered an even deeper decline in the current quarter. Japan has entered a full-blow recession.’

Today saw the trend of Japan’s suffering economy continue, with the release of Japan’s industrial production report for March confirming consensus and sinking by -3.7%. Meanwhile, the annual industrial production figure fell by -5.2.

The Japanese Yen has also struggled from a broad sell-off of safe-haven currencies today, with investors becoming increasingly optimistic over a possible vaccine for the coronavirus.

Pound (GBP) Rises Despite Chancellor’s Warning o

The Pound (GBP) exchange rate struggled today after UK Chancellor Rishi Sunak warned that the UK could be facing a recession ‘the likes of which we haven’t seen’. As a result, Sterling traders have become increasing jittery about the uncertainty facing the British economy.

Mr. Sunak commented while giving evidence to the lords economic affairs committee:

‘Although we have put unprecedented mitigating actions in place, I certainly won’t be able to protect every job and every business. We’re already seeing that in the data, and no doubt there will be more hardship to come. This lockdown is having a very significant impact on our economy. We are likely to face a severe recession, the likes of which we haven’t seen, and of course that will have an impact on employment.’

In UK economic news, today saw the release of the UK ILO unemployment rate for March, which rose by 3.9% despite forecasts of a 4.4% increase.

However, today also saw the release of the UK claimant count change report for April, which soared to a worse-than-expected 856.5 thousand.

Tony Wilson, the director of the institute for Employment Studies, said that the figure was probably an understatemenet of the unemployment crisis, adding:
‘In reality, unemployment today is likely to already be close to 3 million.’

GBP/JPY Outlook: Could Weak Japanese Trade Data Weigh on the Japanese Yen?

Japanese Yen (JPY) investors will be looking ahead to tomorrow’s Japanese trade data. However, with imports and exports expected to plummet in April, we could see the JPY fall deeper.

However, if US-China trade tensions continue to escalate, we could see the Japanese Yen (JPY) claw back some of its losses on returning demand for safe-haven currencies.

Sterling traders will be awaiting tomorrow’s release of the latest UK inflation data. However, with the UK economy already understain from the coronavirus crisis, this is unlikely to boost the Pound.

The GBP/JPY exchange rate will continue to be directed by coronavirus developments this week. If the UK’s coronavirus shows any signs of improvement, then we could see the Pound continue to rise.

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