Pound to Yen (GBP/JPY) Exchange Rate Recoups Ukraine Losses on Sales Data

Pound to Japanese Yen exchange rate chart

The Yen brushed a week high against the US Dollar and strengthened against the Pound on Friday as Ukraine-inspired risk aversion pushed investors towards the safe-haven asset.

After US Secretary of State John Kerry issued warning remarks to Russia the Yen strengthened. Fears that the situation could escalate at any moment are likely to lend the Yen underlying support over the next few days.

Meanwhile, inflation data for Tokyo triggered speculation surrounding the likelihood of the Bank of Japan introducing additional stimulus.

Persistent deflation prompted the central bank to launch an unprecedented level of stimulus in April of last year and since then investors have been questioning whether more needs to be done to shore up Japan’s economy. The BOJ then went on to bring in a tax increase which has significantly restrained consumer demand.

So are the central bank’s efforts having the desired impact?

Tokyo’s consumer price index (excluding fresh food) leapt by 2.7 per cent in April from the same period of the previous year, just shy of the 2.8 per cent estimate.

On a national basis the price gauge was up 1.3 per cent last month year-on-year. The BOJ’s target is 2 per cent.

In the opinion of economist Koya Miyamae; ‘Price gains are likely to stay around this mark […] The data isn’t strong enough to raise expectations for further BOJ easing’.

However, according to a Bloomberg Survey, nearly three quarters of economists expect the BOJ to introduce further stimulus by July.

Bloomberg quoted one Tokyo-based currency strategist as noting; ‘The Tokyo CPI has helped maintain the market’s expectation of additional BOJ easing. Kuroda would be able to justify additional easing if consumer prices fall below 1 per cent without the impact of the sales tax.’

Pound/Yen movement was also inspired by UK retail sales figures this morning.

The Pound was modestly boosted as data revealed that sales including auto fuel climbed by 0.1 per cent in March, month-on-month, rather than declining by 0.4 per cent as expected by economists.

Japanese data to be aware of next week includes national retail sales, industrial production, housing starts and jobless rate figures.