GBP/JPY Rebounds on Japanese Yen Weakness Amid Interest-Rate Gap

The British Pound (GBP) is gaining against the Japanese Yen (JPY) due to broad-based weakness in the Yen rather than strength in the Pound. The GBP/JPY cross is trading around 210, recovering from an intraday low of 208.78. The wide interest-rate gap between the UK and Japan is keeping the British Pound favored against the Yen.

The Bank of Japan (BoJ) has been gradually raising borrowing costs, but its inflationary impact remains limited compared to other central banks. The BoJ raised its policy rate by 25 basis points (bps) to 1.25% at its September meeting, but two policymakers voted to keep borrowing costs unchanged.

Traders are keeping a close eye on the risk of intervention by Japanese authorities as the USD/JPY climbs back toward the psychological 160 mark. Comments from Bank of England officials highlighted differing views within the central bank, with Swati Dhingra saying 'financial conditions have done a lot of tightening work already in the UK' and Clare Lombardelli stating that 'wage growth remains too high to be consistent with inflation target.'

The interest-rate gap between the UK and Japan is currently 2.50%, making the British Pound more attractive against the Yen.