The GBP/JPY pair trades slightly higher around 212.45 during the Asian session on Tuesday, supported by broad weakness in the Japanese Yen (JPY). The Yen came under pressure after Japan’s Prime Minister, Sanae Takaichi, announced plans for a snap general election on Monday.
PM Takaichi confirmed that the lower house of parliament will be dissolved on January 23, with elections scheduled for February 8. On the fiscal front, she pledged to move away from what she described as “excessively tight fiscal policy,” including a proposal to suspend the consumption tax for two years.
These policy signals are viewed as inflationary for Japan’s economy and could reinforce expectations for further interest rate increases by the Bank of Japan (BoJ). The central bank is set to deliver its first monetary policy decision of the year on Friday and is widely expected to keep rates unchanged at 0.75%, while maintaining a hawkish bias toward future tightening.
Meanwhile, the Pound Sterling (GBP) is posting modest gains against the Yen but remains broadly subdued ahead of the United Kingdom’s employment data for the three months ending in November. Market forecasts suggest the ILO unemployment rate eased to 5.0% from 5.1% in the prior period, marking a slight improvement from its highest level since October 2021.
Stronger labor market conditions could reduce expectations for near-term interest rate cuts by the Bank of England (BoE). Investors will also turn their focus to the UK Consumer Price Index (CPI) data for December, due for release on Wednesday, which may further influence the policy outlook.
