GBP/JPY weakens toward one-week lows as intervention talk supports the Yen

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The British Pound (GBP) remains under pressure against the Japanese Yen (JPY) on Friday, with GBP/JPY extending losses for a third straight session as repeated warnings from Japanese officials revive speculation over possible currency intervention.

GBP/JPY slips for a third day as Japan’s intervention warnings weigh on the cross.
Japanese officials reiterate readiness to act against excessive currency moves.
Markets look ahead to the BoJ meeting and Japan CPI, with UK labour, inflation and Retail Sales also due.

Japanese officials remain increasingly concerned about what they describe as one-sided and speculative currency moves, reiterating that recent Yen weakness does not reflect underlying economic fundamentals. Japanese Finance Minister Satsuki Katayama said recently that authorities “will take appropriate action against excessive currency moves without excluding any options,” including the possibility of coordinated action with the United States.

The latest bout of Yen underperformance has been largely driven by rising political uncertainty, after reports that Prime Minister Sanae Takaichi plans to dissolve parliament next week and call a snap general election as early as February.

Meanwhile, attention is also turning to the Bank of Japan’s (BoJ) interest-rate decision on January 23. The central bank is widely expected to keep its policy rate unchanged at 0.75%, underscoring a gradual pace of normalization. BoJ Governor Kazuo Ueda said earlier this month that the central bank remains prepared to raise interest rates further if economic conditions evolve in line with its projections.

According to a recent Reuters poll, economists expect the BoJ to keep interest rates unchanged at its upcoming January and March meetings, but see further tightening later in 2026. Most respondents said the central bank will likely raise its key rate from the current 0.75% to 1.0% or higher by the end of September, with July cited as the most likely timing for the next hike.

In the UK, the policy outlook remains tilted toward gradual easing, though officials have signaled that the decision is becoming a closer call. Bank of England (BoE) policymaker Alan Taylor said this week that interest rates “should continue on a downward path, if my outlook continues to match up with the data, as it has done over the past year.”

Looking ahead, next week’s calendar features several key data releases. In the UK, traders will focus on labour-market figures, inflation data, and Retail Sales. In Japan, the national Consumer Price Index (CPI) is due just hours ahead of the BoJ’s policy decision.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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.