The British Pound (GBP) is gaining modestly against the Japanese Yen (JPY) as traders await key economic events this week. The GBP/JPY pair is currently trading around 210.18, up 0.19% on the day. The Japanese Yen is underperforming its major peers, but price action remains range-bound ahead of the UK Budget and the Bank of Japan’s (BoJ) monetary policy announcement.
The BoJ is expected to keep its policy rate at 1.25% on Friday, despite rising inflation in Japan. September inflation figures showed a 2.1% annual increase excluding fresh food, up from 1.7%, while the measure excluding fresh food and energy rose to 2.4% from 1.9%. BoJ Governor Kazuo Ueda’s remarks will be closely watched, as markets anticipate a potential rate hike in December. Ueda recently noted that “underlying inflation is near the 2% target” and warned that improper policy rate adjustments could raise long-term rates.
However, the Yen’s strength is limited by Japan’s low interest rates and heavy debt burden. The BoJ’s gradual approach may not narrow the interest rate gap with other major economies, especially as energy-driven inflation risks linked to the Middle East conflict keep other central banks hawkish.
On the UK side, Wednesday’s Budget will be closely watched. Traders are focused on how the government will balance economic support with fiscal discipline. Any changes to taxes and spending could influence the British Pound ahead of the Bank of England’s (BoE) November 5 policy decision, with traders fully pricing in a 25-basis-point rate hike. Deutsche Bank economists Sanjay Raja and Maui Brennan suggest that Chancellor Healey may deploy around GBP 20bn in investment over the next five years, a more aggressive move than previously expected.