GBP/JPY At Risk of Downside Above 181.00 Amid Risks Of BoJ Policy Tweak
As long as the GBP/JPY is below the 181.00 level, the pair is at a much higher chance of a sell-off which highlights the importance of this support level. Looking ahead, there are a lot of rumors that the Bank of Japan (BoJ) will change its monetary policy at the 28th July meeting.
Inside Japan, corporate behavior has changed, which has made wages rise as well. At the same time, this move has also changed the deflation risks in Japan. In simple terms, households in Japan now have more disposable income, which is giving rise to the overall demand.
A jump in wages will also allow inflation to remain above the 2% threshold and thus fuel economic growth in Japan. Based on all of these fundamental changes, investors believe that the BoJ may finally change its dovish policy at the next meeting.
BoJ Should Move Away From Current Policy - IMF
According to the IMF (International Monetary Fund), the BoJ needs to move away from its current supportive monetary policy. So it appears that even international monetary institutes are now talking about a change in the BoJ approach which adds more credibility to the talks of a policy change.
At the next meeting, the investors will also get guidance about the inflation situation in Japan. The Japanese government has already released its outlook which puts the inflation at 0.7%. Similarly, the government is projecting a 2.5% increase in wages during FY24 and a 2.6% increase in FY23.
If we look at the GBP side, the currency is not finding ample demand even though the BoE is still hawkish about its interest rate policy. The Bank of England will announce its interest rate decision on the 3rd of August, 2023. For now, the inflation in the UK is still high if we look at the other G7 economies.