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Pound to Japanese Yen Exchange Rate Steady on Hopes for Japanese Economic Recovery

January 25, 2021 - Written by John Cameron

GBP/JPY Exchange Rate Rangebound as Outlook Improves for Japanese Economy

The Pound to Japanese Yen exchange rate held steady today, with the pairing currently fluctuating around ¥142.000.

The Japanese Yen benefited from news that Japan’s economy could recover to levels seen before the Covid-19 pandemic as early as this March.

Bank of Japan (BoJ) Governor Haruhiko Kuroda explains:

‘Both fiscal and monetary policies have been successful in preventing corporate failures and unemployment.

‘We expect, probably by the end of fiscal 2021 or early fiscal 2022, that Japan's economy would recover and come back to levels before the pandemic started.’

As a result, Japanese Yen investors are now more confident that Japan – the third-largest economy – could begin recover in the next few months.

Today also saw reports that Japan could hit Covid-19 herd immunity as early as October this year.

Analysts at Reuters said:

‘Japan is likely to achieve herd immunity to COVID-19 through mass inoculations only months after the planned Tokyo Olympics, even though it has locked in the biggest quantity of vaccines in Asia.

‘That would be a blow to Prime Minister Yoshihide Suga who has pledged to have enough shots for the populace by the middle of 2021, as it trails most major economies in starting COVID-19 inoculations.’

Pound Steady as UK Prime Minister Hints at Easing Lockdowns in February

Sterling held steady against the Japanese Yen despite promising comments from UK Prime Minister Boris Johnson, who said Downing Street would be ‘looking at the potential of relaxing some lockdown measures’ in February.

As a result, GBP investors are becoming more hopeful that the UK economy could begin to take steps toward reopening its economy after mid-February.

However, Mr Johnson also warned:

‘We have to realise there is at least the theoretical risk of a new variant that is a vaccine-busting variant coming in, we’ve got to be able to keep that under control.’

Meanwhile, GBP traders will be awaiting today’s speech from Andrew Bailey, the Governor of the Bank of England (BoE).

Any downbeat comments about the future of the British economy, however, would be GBP-negative.

GBP/JPY Outlook: Could an Improving Outlook for the Japanese Economy Boost the Yen?

Pound traders will be eyeing tomorrow’s release of November’s UK ILO Unemployment Rate data.

Any signs that the UK’s labour sector is suffering from rising joblessness would be GBP-negative.

However, UK markets will continue to monitor the UK’s Covid-19 situation.

If Downing Street looks set to meet its vaccination targets on 15th February, we will see Sterling rise.

However, any indications that Downing Street could extend lockdowns further would drag down the GBP/JPY exchange rate.

Meanwhile, the Japanese Yen will continue to be driven by Japanese economic news.

If it looks like the Japanese economy could begin to recover in March, as reports suggest, then the JPY/GBP exchange rate could head higher.

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