GBP/JPY eases within range as BoJ comments support the Yen

The British Pound (GBP) trades slightly lower against the Japanese Yen (JPY) on Friday, as the Yen draws broad-based support following fresh comments from Bank of Japan (BoJ) Governor Kazuo Ueda, which reinforced expectations of further monetary policy tightening. At the time of writing, GBP/JPY is trading around 210.80, remaining confined within a two-week consolidation range.

BoJ Governor Kazuo Ueda reiterated that the central bank remains prepared to raise interest rates further if economic conditions evolve in line with its projections. Speaking earlier on Monday, Ueda said he expects Japan’s economy to sustain a cycle in which wages and prices rise moderately, adding that adjusting the degree of monetary support would help achieve stable and sustainable economic growth.

His remarks strengthened market expectations that the Bank of Japan is moving cautiously but steadily toward further policy normalization, following its decision to lift the policy rate target to 0.75% at the December meeting, the highest level in around three decades.

The sustained weakness in the Japanese Yen has also strengthened the case for further policy tightening. According to the latest BHH MarketView report, the swaps curve is pricing in nearly 50 basis points (bps) of rate hikes by the BoJ over the next twelve months.

On the data front, Japan’s Jibun Bank Manufacturing PMI edged up to 50.0 in December from 49.7 in November, offering modest additional support to the Yen.

On the UK side, the policy backdrop remains more cautious. At its December meeting, the Bank of England (BoE) maintained a gradual easing bias but signalled that future rate decisions are becoming a “closer call.”

While policymakers acknowledged that interest rates could move lower over time, they stopped short of offering clear guidance on the timing or pace of further easing. As a result, market pricing remains restrained, with only one additional BoE rate cut fully priced in for 2026.

Looking ahead, the economic calendar remains relatively light on both sides. In the UK, attention will turn to S&P Global Composite and Services PMI data due on Tuesday. In Japan, markets will watch the Jibun Bank Services PMI on Wednesday, followed by labour cash earnings and consumer confidence figures on Thursday.