British Pound faces continued pressure against Japanese Yen as risk aversion prevails

Safe-haven demand for the Japanese Yen weighs on GBP/JPY as the AI-led equity sell-off intensifies.
The Yen's advance remains limited as declining JGB yields deepen Japan's yield disadvantage.
Persistent inflation risks keep policy outlooks hawkish at both the BoE and BoJ.

Safe-haven buying of the Japanese Yen (JPY) over the British Pound (GBP) leaves GBP/JPY under modest selling pressure on Friday as the AI-led share-market sell-off deepens. The same risk-averse sentiment is supporting demand for Japanese government bonds, however, lowering yields and limiting the Yen's appreciation.

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.

How Is The Japanese Yen Performing Today?

The Japanese Yen recorded its strongest performance against the New Zealand Dollar today. The table below sets out the Japanese Yen's (JPY) percentage changes against the major currencies listed.

	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 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. For instance, choosing the Japanese Yen on the left and following that row across to the US Dollar gives the percentage change for JPY (base)/USD (quote) in the corresponding cell.

With a 4.70% decline on the day, Japan's benchmark 10-year government bond yield is trading near 2.63%, its lowest level in four months. Lower interest rates relative to major peers already leave the Yen at a yield disadvantage; the decline in bond yields compounds that pressure.

After gradually lifting interest rates, the Bank of Japan (BoJ) paused in October following a 25-basis-point increase in September that brought its policy rate to 1.25%. Further tightening remains the message from policymakers. Minutes of the September meeting, published on Thursday, showed agreement among members on continuing rate increases and gradually scaling back monetary easing.

A faster pace of rate increases would be necessary if inflation began to exceed expectations, one member said. Meanwhile, many members cautioned that climbing crude oil prices continued to pose substantial upside risks to inflation.

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

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

Can the BoE's hawkish stance and elevated UK yields sustain support for the Pound?

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”. Expectations of further policy tightening were reinforced by Governor Bailey, whom the analysts highlight as having “stated clearly that there was a strong case for another rate hike if the US-Iran conflict is not resolved,”. Their assessment concludes that “overall, today’s hawkish BoE policy update should reinforce the GBP’s bullish momentum heading into year-end.”