The British Pound (GBP) strengthens against the Japanese Yen (JPY) on Tuesday as the yen weakens broadly after reports that Japan’s Prime Minister Sanae Takaichi raised concerns about further interest rate hikes in a meeting with Bank of Japan (BoJ) Governor Kazuo Ueda last week.
At the time of writing, GBP/JPY trades near 210.45, breaking above its two-week range and up around 0.82%.
According to the Mainichi, PM Takaichi took “a tougher attitude than during the last meeting in November last year.” Markets reacted swiftly, as the report added another layer of uncertainty to the Bank of Japan’s tightening path. However, the exact implications remain unclear.
Governor Kazuo Ueda said last Monday that the meeting was a general exchange of views on economic and financial developments and stressed that the prime minister did not make any specific monetary policy requests.
The prospect of a delay in raising borrowing costs weighs heavily on the yen. Markets are now awaiting further clarification from the BoJ, as traders reassess the timing of the next rate hike.
Earlier expectations had centered on a potential move as soon as April, but the latest developments raise the possibility that tightening could be pushed back to the second half of the year.
At the same time, recent data showed inflation eased in January, reinforcing the view that the BoJ can afford to remain patient before considering further rate hikes. Attention now shifts to Tokyo Consumer Price Index (CPI) data due on Friday.
In the United Kingdom, growing expectations of interest rate cuts by the Bank of England (BoE) could act as a headwind for the British Pound amid softer labor market conditions and easing inflation pressure.
Traders now await testimony from BoE Governor Andrew Bailey later in the day, along with remarks from several other policymakers.
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