British Pound flatlines against the Japanese Yen, amid soft UK CPI data
Oleh Guillermo Alcala
Diperbarui: 20 May 2026
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The Pound (GBP) is trading practically flat against the Japanese Yen (JPY) on Wednesday, moving halfway through the last three weeks’ trading range, a few pips below 213.00.
- GBP/JPY looks for direction just below 213.00 halfway through the last few weeks' range.
- UK CPI softened beyond expectations in April, adding some pressure on the Pound.
- The wide differential between Japanese and US bond yields is acting as a headwind for Yen recovery.
The Pound (GBP) is trading practically flat against the Japanese Yen (JPY) on Wednesday, moving halfway through the last three weeks’ trading range, a few pips below 213.00. A sharper-than-expected decline in UK inflation in April hurt the Pound, but the Yen remains weighed down by the differential between Japanese and US Treasury yields as energy prices boost inflationary risks.
UK Consumer Prices Index (CPI) data for April showed inflation cooled to a 2.8% year-on-year from 3.3% in March, below the 3% forecast by market analysts. The core CPI eased to a 2.5% yearly growth from 3.1% in March, also below the 2.6% market consensus.
Producer Price Indexes (PPI), on the other hand, have shown higher-than-expected figures, with the Input prices jumping to more than three-year highs at a 7.7% YoY rate, although Output prices have shown a more moderate increase.
The market has taken these figures as a token that the Bank of England (BoE) will keep interest rates unchanged in June, and the Pound responded with minor pullbacks against most major currency peers.
The Yen, on the other hand, remains weighed down by the wide differential between US Treasury yields and the Japanese Government Bond (JGB) yields. This leaves the JPY as a currency of choice for carry trade, consisting of borrowing a low-yielding currency to buy a higher-yielding one. US Treasury Secretary Scott Bessent pressured the Japanese authorities, on his visit to Japan, to clear political hurdles for the Bank of Japan (BoJ) to tighten its monetary policy to support an ailing Yen.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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