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Pound Japanese Yen (GBP/JPY) Exchange Rate Steady as Japanese Industrial Production Dips in July

August 31, 2021 - Written by John Cameron

GBP/JPY Exchange Rate Rangebound as Japanese Covid-19 Vaccinations Increase

The Pound Japanese Yen (GBP/JPY) exchange rate held steady following the release of the latest flash Japanese industrial production figure for July, which fell below forecasts from 23% to 11.6%. The pairing is currently fluctuating around ¥151.20.

An official at the Japanese Ministry of Economy commented on the data:

‘The sectors are experiencing a major disruption in the supply of parts, especially from Southeast Asia, due to restrictions in economic activities … Despite the fall this month, we expect output levels will remain relatively high.’

However, with the Japanese economy quickly bouncing back after the nation eased lockdown restrictions, JPY investors remain confident about the nation’s economic recovery.

Added to this Japan has ramped-up its vaccination programme, buoying optimism in economic growth in the months ahead.

James Gannon and Kazuyo Kato writing for the Asia-Pacific The Diplomat commented:

‘Japanese doctors administered more than 1 million doses a day throughout most of the summer. By the end of August, 45 percent of the population had received two shots, and in a few weeks, Japan is likely to pass the United States, which currently has fully vaccinated around 52 percent of its population. Close to 90 percent of seniors in Japan are fully vaccinated, more than in many countries that started their campaigns much earlier.’

If Japan catches up with the US, then we could see the JPY/GBP exchange rate quickly head higher as confidence in the Japanese economy grows.

Pound (GBP) Exchange Rate Steady Despite Strong UK Business Confidence

The Pound (GBP) failed to rise against the Japanese Yen (JPY) today despite UK business confidence being at a four-year high, according to Lloyds bank.

Hann-Ju Ho, a senior economist at Lloyds bank, commented, saying that the business confidence gauge presented a ‘positive story about the country’s economic recovery ... Staff shortages remain a challenge but as the economy moves back towards pre-pandemic levels we can be optimistic that the momentum for business confidence and economic optimism can be sustained in the months ahead.’

Gareth Oakley, managing director for business banking at Lloyds, said:

‘It is clear there is still some level of uncertainty on inflation and the impact of price pressures. The last few months of the year will be pivotal to the future of UK economic growth.’

As a result, growing fears over staff shortages has limited confidence in the outlook for the UK economy.

In addition, Covid-19 infections and hospitalisations are expected to rise in autumn, leaving some Pound investors worried that this could have an impact on the economy should further restrictions be introduced.

GBP/JPY Exchange Rate Forecast: UK Manufacturing Data in Focus

Pound (GBP) investors will be looking ahead to tomorrow’s release of the latest UK manufacturing PMI figure for August.

Could an improvement of the UK’s manufacturing sector boost the GBP/JPY exchange rate?

Tomorrow will also see the release of the Japanese Jibun Bank manufacturing PMI data for August.

If this shows a strengthening Japanese economy, then the Japanese Yen could head higher.

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