Pound Japanese Yen (GBP/JPY) Exchange Rate Left Flat as Japan Faces Largest Post-War Slump

June 8, 2020 - Written by John Cameron

STORY LINK Pound Japanese Yen (GBP/JPY) Exchange Rate Left Flat as Japan Faces Largest Post-War Slump

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Muted as Japan’s GDP Shrinks Less Than Expected

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate was left flat on Monday morning. This left the pairing trading at around ¥138.6830.

The Japanese Yen was left muted against the Pound after data revealed the Japanese economy shrank less than expected in the first three months of 2020.

The revised data revealed the economy shrank by -0.6% quarter-on-quarter while annual growth slumped by -2.2%. This offered the Yen some support this morning.

This was better than the earlier estimate of a -3.4% contraction, although it still shows the broad impact from the coronavirus pandemic is still likely to send Japan deeper into recession.

A series of economic data including jobs figures and factory output have suggested the country is facing its largest post-war slump in Q2 2020 as the crisis forced people to stay at home.

Commenting on the revised growth data, Norinchukin Research Institute’s Chief Econmist, Takeshi Minami noted:

‘While the nationwide state of emergency has been lifted, Japan’s economy will likely suffer a huge contraction in the current quarter because it will take quite a long time for business to return to pre-COVID levels.

‘Growth may rebound in July-September driven by private consumption. But capital expenditure could slow by then. We need to be mindful of the risk that economic activity could slump again if Japan is hit by a second wave of infection rises.’

Sterling (GBP) Left Flat as Brexit Worries Linger

Meanwhile, Sterling was left flat against the Yen as plans to ease Covid-19 lockdowns in the UK and sings the economy could bounce back offered the British currency some support.

However, analysts have warned that Brexit continues to remain a risk for GBP, which has been able to edge higher against safe-haven currencies such as the Japanese Yen and US Dollar (USD) over the past week.

The threat of the UK crashing out of the European Union without a deal secured at the end of the transition period continued to weigh on the Pound. Talks between London and Brussels failed to make progress which further weighed on GBP.

Although, the Daily Mail reported the Prime Minister is willing to accept some EU tariffs on UK goods to win a trade deal and break the impasse. The newspaper also said that Britain’s chief negotiator, David Frost, has made a new offer.

Meanwhile, newspapers reported that Prime Minister Boris Johnson is planning to relax measures on outdoor dining and weddings. Added to this, he is said to be speeding up government investment plans to help limit the economic chaos from the coronavirus crisis.

Data also showed the number of British shoppers in early June suggests there is a pent-up demand for shopping in physical shops as lockdown measures are eased.

Pound Japanese Yen Outlook: Lockdown Easing and Japanese Machinery Orders in Focus

Looking ahead, the Pound (GBP) could edge higher against the Japanese Yen (JPY) if the British government announces further plans to ease lockdown restrictions.

If optimism increases as Boris Johnson’s government outlines further plans to ease lockdown restrictions, Sterling could receive a boost.

However, pessimism about post-Brexit trade discussions between the UK and EU could limit Sterling gains.

Meanwhile, Tuesday’s Japanese machinery orders data could weigh on the Japanese Yen. If April’s orders plummet further than expected it will send the Pound Japanese Yen (GBP/JPY) exchange rate higher.

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