British Pound edges down against Japanese Yen on hawkish BoJ bets

The British Pound experienced mild selling pressure against the Japanese Yen during the European trading session on Friday. The GBP/JPY pair declined as the Japanese currency outperformed others, driven by expectations of the Bank of Japan (BoJ) raising interest rates in the September meeting. Sources familiar with the matter reported that the BoJ is likely to hike rates more aggressively than the current pace of roughly twice a year.

Additionally, investors are awaiting fresh remarks from Japan’s Ministry of Finance about potential US-Japan joint intervention to curb excessive Yen volatility. Meanwhile, UK employment data for the three months ending June and Consumer Price Index (CPI) data for July will be closely watched by investors for insights into the Bank of England’s (BoE) monetary policy outlook.

Financial markets currently do not anticipate any BoE rate hike in the near term, and analysts at Societe Generale believe the latest UK activity data is unlikely to alter the BoE’s policy outlook. The BoE expects to maintain the Bank Rate at 3.75% throughout 2026 if energy prices remain stable, anticipating a gradual economic slowdown in the second half of the year.

The UK Consumer Price Index, a measure of consumer price inflation, is released monthly by the Office for National Statistics and is crucial for the government’s inflation target. A high reading is typically seen as positive for the Pound Sterling, while a low reading can be bearish. Conversely, a decrease in inflation suggests a more relaxed monetary policy.