Japanese Yen (JPY) Falls 0.4% against the Pound as Bank of Japan Maintains Stimulus

The Japanese Yen fell against the Pound but strengthened against a broadly softening US Dollar on Wednesday. The Asian asset put on a mixed performance as domestic inflation falling to 0% prompted the Bank of Japan to keep its unprecedented level of fiscal stimulus in place. Economist Junko Nishioka said of the decision; ‘The BOJ appears to be confident about the outlook for the economy. It’s unlikely the BOJ will move later this month, even if they have to cut their inflation forecast because of oil.’

The Pound also gained on the Yen as Tuesday’s positive UK Services PMI was followed by encouraging domestic new vehicle sales data. The Japanese Yen is likely to experience fluctuations in the hours ahead in response to the publication of the highly influential US Non-Farm Payrolls report. If the minutes are dovish in tone it will decrease the odds of the Fed increasing interest rates in the summer and the Yen will advance on its US peer. Conversely, hawkish minutes may see the USD/JPY pairing advance.

Japanese data to be aware of over the rest of the week includes the Bank of Japan’s Monthly Economic Report for April, Machine Tool Orders figures and Bank Lending numbers. Next week the BOJ will be publishing its policy meeting minutes and they may shed more light on the central bank’s inflation/policy outlook. Of course, the GBP/JPY exchange rate will continue to be effected by UK political uncertainty in the run up to the general election.