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GBP/JPY Forecast: Pound to Japanese Yen Exchange Rate Edges Higher on Dovish BoJ Outlook

April 27, 2021 - Written by John Cameron

The Pound to Japanese Yen (GBP/JPY) exchange rate is edging higher today after the Bank of Japan (BoJ) kept interest rates at -0.1, as expected.

At the time of writing the GBP/JPY exchange rate is trading at around 150.268 as the Pound is supported by an expected rapid UK economic recovery.

Pound Sterling (GBP) Exchange Rate Supported by UK Economic Recovery Hopes

The Pound has found support against the Japanese Yen today as hopes for a rapid recovery from the coronavirus pandemic in the UK increases.

According to the latest figures from the Office for National Statistics (ONS), Covid-19 related deaths in England and Wales have fallen by 97 per cent since the peak of the second wave.

The fall in deaths and cases paired with the success of the UK’s vaccination rollout has caused investors to become increasingly optimistic surrounding the UK’s economic recovery from the pandemic.

The next stage of lockdown easing in England is expected to commence on the 17th May, investors will keep an eye on whether the phased reopening has an effect on case numbers in the coming weeks.

Despite an absence of any notable UK economic data, the GBP/JPY exchange rate has held its ground.

Japanese Yen (JPY) Exchange Rate Weakens on BoJ Decision

The Japanese Yen has weakened against the Pound today following the latest interest rate decision from the BoJ.

The BoJ chose to keep interest rates at -0.1% to help combat the effects of the coronavirus pandemic, and were dovish in their outlook and whilst GDP forecasts were upgraded, inflation was cut.
According to the outlook from the BoJ:

‘The year-on-year rate of change in the CPI is likely to be slightly negative for the time being, mainly affected by COVID-19 and the reduction in mobile phone charges... Thereafter, the year-on-year rate of change in the CPI is expected to turn positive and then increase gradually, mainly on the back of economic activity continuing to improve and the effects of the reduction in mobile phone charges dissipating. Medium- to long-term inflation expectations also are expected to rise again.’

GBP/JPY Exchange Rate Forecast: Japanese Retail Sales in Focus

For Japanese Yen traders, tomorrow will see the release of the latest retail sales figures from Japan which are forecast to have surged 4.5% and re-entered growth territory the highest reading in 3 months which could boost JPY.

Pound investors will be focusing on any further coronavirus developments in the coming days, with the third stage of England’s lockdown easing fast approaching investors will hope nothing derails the roadmap.

The GBP/JPY exchange rate movement could also be driven by the Federal Reserve’s latest interest rate decision tomorrow, as the Fed is expected to keep a dovish tone JPY could head higher.

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