The Pound picks up from weekly lows against the Yen following BoJ Ueda’s conference. solid UK consumption data.
The Yen Jumped earlier on Friday, after a hawkish hold by the Bank of Japan.
UK Retail Sales beat forecasts amid a strong increase in clothing, non-store retail, and specialist food shops.
The British Pound bounced up from weekly lows near 199.35 and returned above 199.50 as the Yen gave away some of its previous gains after BoJ Governor Ueda’s press conference. In the UK, upbeatrt retail sales figures have contributed to providing some support to the Pound.
Ueda said that the economy remains resilient despite the impact of tariffs and reiterated the bank’s commitment to continue tightening its monetary policy if the economy and prices move in line with forecasts.
Somewhat earlier, the Bank of Japan held its benchmark interest rate at 0.5%, as widely expected, but rattled markets by announcing plans to sell its holdings of exchange-traded funds (ETFs) and real-estate investment trusts (REITs). The Yen appreciated across the board following the decision.
In the UK, Setail Sales data from August beat expectations, showing a 0.5% monthly increase and a 0.7% year-on-year growth, beyond the market consensus of 0.4% and 0.6% respective figures. Excluding fuel, sales of all other products grew 0.8% in August and 1.2% on the year, also above the market consensus of 0.3% and 0.8% respective increases.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
