• GBP/JPY drops to its lowest level since March 6 as the Yen strengthens on intervention signals.
• Japanese officials ramp up verbal intervention as USD/JPY tests the key 160.00 threshold.
• Oil-driven inflation and Middle East tensions cloud global monetary policy outlook.

The British Pound (GBP) edges lower against the Japanese Yen (JPY) on Monday as the Yen strengthens across the board after Japanese authorities stepped up verbal intervention following USD/JPY’s move toward the 160.00 level, a threshold that has previously triggered official action.

At the time of writing, GBP/JPY is trading around 210.2, marking its lowest level since March 6.

Japan’s top currency diplomat, Atsushi Mimura, said on Monday that authorities will not rule out any steps to respond to excessive currency moves. He warned that speculative activity is picking up in FX markets and added that if it continues, “we believe decisive action may soon be necessary.”

Meanwhile, the Bank of Japan’s (BoJ) Summary of Opinions highlighted growing concern among policymakers, with one member noting that monetary tightening could become necessary if cost-push pressures intensify due to an excessively weak Yen or if second-round inflation effects become more pronounced.

Another member added that the central bank must pay close attention to whether it becomes necessary to accelerate the pace of rate hikes or shift toward more neutral or restrictive financial conditions if the Middle East conflict intensifies.

In addition, BoJ Governor Kazuo Ueda said the central bank will closely monitor foreign exchange developments and assess their implications for achieving its 2% inflation target. He added that the BoJ will guide monetary policy appropriately by evaluating how currency moves affect the outlook for growth, prices, and associated risks.

The verbal intervention helped support the Yen, although volatility is likely to remain elevated as Oil prices stay high amid the ongoing US–Israel war with Iran, adding to inflationary pressures from the weak currency and keeping the BoJ on a tightening path.

Traders are also reassessing the monetary policy outlook and trimming bets on imminent rate hikes across major economies, as investors grow more concerned about the impact of rising energy prices on economic growth than inflation.

In the United Kingdom, traders have pared back expectations for an April rate hike by the Bank of England (BoE) but still see around two rate increases later this year, a sharp shift from earlier expectations of rate cuts.

Looking ahead, attention now turns to upcoming data releases, including Tokyo CPI, Japan’s Unemployment Rate and Retail Trade figures, as well as the United Kingdom’s Gross Domestic Product (QoQ) for Q4, all due on Tuesday, which could provide fresh direction for GBP/JPY.