Forex
Home›Forex›Major Pairs›GBP/JPY jumps to a new one-week high on softer yen
GBP/JPY jumps to a new one-week high on softer yen
The yen's slide is linked to Japan fiscal concerns, a proposed cut to the food consumption tax, and ongoing interest rate differentials that support carry trades.
British pound versus Japanese yen is pushing higher in early European trade, with GBP/JPY rising to roughly the 214.00 area and printing an over one-week high.
FXStreet attributes the yen weakness to concerns over Japan’s worsening fiscal outlook tied to Prime Minister Sanae Takaichi’s aggressive stimulus and tax cuts. The ruling Liberal Democratic Party is backing a proposal to cut the food consumption tax from 8% to 1% for two years starting in April 2027, and the government has also proposed about ¥600 billion a year in cash transfers for low- and middle-income households as part of a relief package.
The outlet also points to wide interest rate gaps that keep the carry trade active. The Bank of Japan lifted its short-term policy rate in June to 1.00%, while the Bank of England’s base rate is 3.75%, leaving a gap of around 275 basis points that supports the pound against the yen.
Market focus, according to FXStreet, is now on the upcoming UK quarterly GDP release, which it says could be a key driver for the British pound and therefore the direction of GBP/JPY. It also notes the recent corrective pullback from the 219.60 area, reached in July, appears to have eased.