Risk aversion keeps British Pound under pressure against Japanese Yen

The AI-led equity sell-off lifts demand for the Japanese Yen, weighing on GBP/JPY.
Yen gains remain constrained as lower JGB yields deepen Japan's yield disadvantage.
Persistent inflation risks keep both the BoE and BoJ hawkish on the policy outlook.

Lower Japanese government bond yields are limiting the Yen’s gains as risk aversion lifts demand for the bonds. Nevertheless, GBP/JPY has a modest downward bias on Friday, with investors preferring the safe-haven Japanese Yen (JPY) to the British Pound (GBP) as the AI-led equity sell-off intensifies.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Having touched an intraday low of 211.36, GBP/JPY is trading near 212 at the time of writing.

Japanese Yen Leads Gains Against New Zealand Dollar Today

Today's percentage moves in the Japanese Yen (JPY) against the major currencies listed are set out below. The Yen recorded its strongest performance against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.63%	0.58%	0.49%	0.60%	0.97%	1.07%	0.42%
EUR	-0.63%		-0.05%	-0.14%	-0.03%	0.34%	0.44%	-0.22%
GBP	-0.58%	0.05%		-0.08%	0.02%	0.40%	0.49%	-0.17%
JPY	-0.49%	0.14%	0.08%		0.14%	0.51%	0.61%	-0.05%
CAD	-0.60%	0.03%	-0.02%	-0.14%		0.38%	0.47%	-0.19%
AUD	-0.97%	-0.34%	-0.40%	-0.51%	-0.38%		0.09%	-0.57%
NZD	-1.07%	-0.44%	-0.49%	-0.61%	-0.47%	-0.09%		-0.64%
CHF	-0.42%	0.22%	0.17%	0.05%	0.19%	0.57%	0.64%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. Selecting the Japanese Yen on the left, for instance, and following that row across to the US Dollar gives the percentage change for JPY (base)/USD (quote) in the corresponding cell.

At around 2.63%, Japan’s benchmark 10-year government bond yield is down 4.70% on the day and at a four-month low. This decline adds to the pressure on the Yen, which already suffers from Japan’s lower interest rates relative to those of its major peers.

A 25-basis-point increase in September brought the Bank of Japan (BoJ) policy rate to 1.25%, before the central bank paused in October. Its gradual rate increases remain on course to continue, according to policymakers’ signals. Minutes of the September meeting, published on Thursday, showed agreement among members to raise rates further and gradually scale back monetary easing.

Should inflation show signs of exceeding expectations, the BoJ would need to accelerate its rate increases, one member said. Many members also cautioned that higher crude oil prices continue to pose substantial upside risks to inflation.

In the UK, an 8–1 vote on Thursday saw the Bank of England (BoE) increase its benchmark interest rate by 25 basis points to 4.00%. Catherine Mann, an external MPC member, preferred a larger rise of 50 basis points to 4.25%.

With its first rate increase since 2023, the BoE joins other major central banks in tightening monetary policy. The aim is to curb inflation driven by rising energy costs associated with the war in the Middle East.

Sterling finds support as hawkish BoE stance sustains elevated UK yields

Responding to the “hawkish message from the BoE signalling that at least one more hike is likely in the current tightening cycle.” investors have helped UK yields remain relatively resilient, according to MUFG analysts, who note that “UK yields have held up better than in other major economies”. They also point to Governor Bailey, who “stated clearly that there was a strong case for another rate hike if the US-Iran conflict is not resolved,” strengthening expectations of further policy tightening. In MUFG’s assessment, “overall, today’s hawkish BoE policy update should reinforce the GBP’s bullish momentum heading into year-end.”