- The GBP/JPY can have difficulties since the Japanese prime minister ishiba is expected to remain in office despite the LDP ruling coalition losing the majority.
- The JPY can face challenges as Japan’s opposition is expected to advocate an increase in government spending and tax cuts.
- The GBP advances slightly in the middle of a lower probability of multiple cuts of interest rates by the BOE in 2025.
The GBP/JPY can be seen after opening with a downward GAP, quoting around 198.90 during the European hours on Monday. However, the currency crossing can face challenges since the Japanese Yen (JPY) remains firm while the Japanese Prime Minister (PM) Shigeru ishiba is expected to remain in office despite the fact that the coalition of the Runner Liberal Democratic Party (LDP) governs will lose its majority in the elections of the upper house, as expected. This has probably relieved concerns about a more severe political change or a possible resignation.
However, the JPY can face challenges since the opposition will probably press for an increase in government spending and tax cuts, which could carry the yields of the Japanese government bonds (JGB) to maximum of several years. However, Ishiba mentioned that the opposition proposal to cut taxes would take too much time, and needs faster action to help homes in difficulties.
The Japanese prime minister ishibited on Monday against the Ruler Democratic Liberal Party (LDP) for electoral loss, adding that he will continue to rule in coalition with Komeito. Ishiba also stressed that the most important thing for Japan is political stability, since it faces several challenges.
On a commercial agreement with the United States (USA), Istiba reiterated its intention to reach an agreement with the US on tariffs while protecting national interests. He said he wants to talk to President Trump as soon as possible to find a commercial solution.
The GBP/JPY crossing gains ground as the sterling pound (GBP) advances slightly, driven by the decrease in the probability of multiple trim of interest rates by the Bank of England (BOE) in 2025.
A Reuters report suggested that several Wall Street runners have reviewed their expectations for BOE rates cuts after the consumer price index (ICC) of the United Kingdom in June is higher than anticipated and the labor market data for the three months that ended in May show less weakness than expected.
Japanese – frequent questions
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
