• GBP/JPY scales higher for the second straight day on Thursday amid a broadly weaker JPY.
• The divergent BoJ-BoE policy expectations might keep a lid on any further appreciation.
• Traders might also opt to wait for Friday’s release of Japan’s National CPI and global PMIs.

The GBP/JPY cross attracts buyers for the second consecutive day and climbs to the top end of its weekly range during the Asian session on Thursday. Spot prices, however, lack bullish conviction and remain below mid-209.00s, warranting caution before positioning for an extension of this week's bounce from the 207.30-207.25 region, or a nearly two-month low.

The Japanese Yen (JPY) continues with its relative underperformance amid concerns about Japan's fiscal health and turns out to be a key factor acting as a tailwind for the GBP/JPY cross. Japan's Prime Minister Sanae Takaichi is expected to roll out policies to help revive the economy after a landslide victory in a general election earlier this month. Moreover, Japan's weak GDP growth data puts extra pressure on Japan's PM Takaichi to announce more stimulus.

Meanwhile, the International Monetary Fund (IMF) warned against cutting the consumption tax, saying that it would erode Japan's fiscal space and raise debt risks. This, along with the underlying bullish sentiment, undermines the JPY's safe-haven status and lends additional support to the GBP/JPY cross. Investors, however, seem convinced that Takaichi's policies will boost the economy and prompt the Bank of Japan (BoJ) to stick to its policy-tightening path.

The hawkish BoJ expectations mark a significant divergence in comparison to the growing acceptance that the Bank of England (BoE) will cut interest rates as early as the March meeting. The bets were reaffirmed by the disappointing UK jobs report and a fall in the UK consumer inflation to its lowest level in nearly a year. This, in turn, might hold back bullish traders from placing aggressive bets around the GBP/JPY cross and keep a lid on any meaningful appreciation.

The market focus now shifts to the release of Japan's National Consumer Price Index (CPI) on Friday. Furthermore, the flash global PMIs will influence the broader risk sentiment, which will drive demand for the JPY and provide some meaningful impetus to the GBP/JPY cross. From a technical perspective, bearish traders need to wait for a sustained break and acceptance below the 100-day Simple Moving Average (SMA) support before positioning for any further losses.