The GBP/JPY currency pair declined on Thursday, trading around 211.07, down approximately 0.42% for the day, as the Japanese Yen (JPY) strengthened broadly following the Bank of Japan’s (BoJ) monetary policy decision. Despite the British Pound (GBP) showing relative strength against other major currencies after the Bank of England’s (BoE) hawkish hold, it struggled to gain ground against the Yen [1].
Both the BoE and BoJ kept their interest rates unchanged at their latest policy meetings, aligning with market expectations. The BoE held rates at 3.75% in a unanimous decision, reinforcing its hawkish stance. The BoE stated it would closely monitor Middle East tensions and their impact on global energy supply and prices, and stands ready to act as necessary to ensure CPI inflation remains on track to meet the 2% target in the medium term. The BoE revised its inflation outlook higher, now expecting CPI to average around 3% in Q2 2026, up from 2.1% in its February projections. Governor Andrew Bailey highlighted the impact of Middle East conflict on energy prices, warning of potential increases in household energy bills if elevated prices persist [1].
The BoJ maintained its policy rate at 0.75% in an 8-1 decision, with board member Hajime Takata dissenting in favor of a 25 basis point rate hike. The BoJ reiterated its intention to raise rates if economic and price conditions evolve as forecasted, and emphasized risks to Japan’s economic outlook, including developments in the Middle East, oil price movements, and excessive Yen weakness. BoJ Governor Kazuo Ueda noted that inflation is expected to face upward pressure from higher oil prices, but expressed uncertainty about whether the focus should be on curbing inflation or supporting the economy, and stated it is unclear how long it will take to assess the impact of energy shocks on underlying prices [1].
Market data showed the US Dollar (USD) was the strongest against the Swiss Franc, while the GBP was down 0.44% against the JPY. The GBP, however, gained against other major currencies, up 0.39% against the USD and 0.09% against the EUR [1].
CONCLUSION
The GBP/JPY pair declined as Yen strength, driven by the BoJ's policy stance, outweighed the BoE's hawkish hold and revised inflation outlook. Both central banks flagged inflation risks from elevated energy prices amid Middle East tensions. The market reaction suggests continued sensitivity to global energy developments and central bank policy signals.