Pound to Japanese Yen Rises as Japan’s Economy Shrinks by 4.8% in 2020

February 15, 2021 - Written by John Cameron

STORY LINK Pound to Japanese Yen Rises as Japan’s Economy Shrinks by 4.8% in 2020

GBP/JPY Exchange Rate Heads Higher as Japanese Economy Struggles with Covid-19

The Pound to Japanese Yen rose by 0.6% today after the UK hit its target of 15-million vaccinations over the weekend. The pairing is currently fluctuating around ¥146.32.

The Japanese Yen suffered today following news that the Japanese economy had shrunk by -4.8% in 2020 because of Covid-19.

Takumi Tsunoda, senior economist at Shinkin Central Bank Research, told Reuters:

‘The conditions are such that Japan will not be able to avoid negative growth in the first quarter.

‘There is a high possibility that there will be a repeating cycle of coronavirus infections spreading and being contained this year, which means that consumption is not likely to recover at the expected pace.’

As a result, JPY investors are becoming concerned about the world’s second-largest economy. This is despite the Japanese Government announcing further stimulus in December.

Japan's Prime Minister Yoshihide Suga announced a 73.6-trillion Japanese Yen package to help pull Japan’s economy out of its slump.

Pound Heads Higher as UK Hits 15-Million Covid-19 Vaccination Target

The Pound rose today after the UK Government hit its 15-milllion target for first-time Covid-19 vaccinations. As a result, demand for GBP has risen on renewed hopes in the nation’s economic recovery in the months ahead.

Now Downing Street is preparing the next phase of the coronavirus vaccine rollout. Ministers are now planning to vaccinate the remaining priority groups, estimated at around 17-million people.

However, Sterling investors are remaining cautious after Professor Neil Ferguson, a scientist advising the Government’s coronavirus response, warned:

‘Our current virus, which is the dominant one in the country, only requires one or two more mutations to partially escape immunity – and that means immunity naturally gained or immunity gained by being vaccinated – and so it is imperative that we monitor the situation as closely as we can.’

Health Minister Matt Hancock was however hopeful that the current lockdown will be the last, adding:

‘Having a sustainable exit – so lifting the measures in such a way that can be sustainable and we don’t have to have another lockdown – that is obviously an important part of our considerations.’

With the UK speeding ahead of many countries with its vaccination programme, however, GBP investors are more optimistic about the outlook for Britain’s economy going forward.

Outlook: Japanese Trade Data in Focus

Japanese Yen investors will be awaiting tomorrow’s publication of the Japanese trade date. Any improvement in January’s exports, which are forecast to rise by 6.6%, would be JPY-positive.

Tomorrow will also see the release of the latest Japanese Machinery Orders for December. If these sink by the consensus of -6.2, however, then this could further drag down the Japanese Yen.

Pound traders will continue to monitor the UK’s Covid-19 situation this week. If Covid-19 vaccinations continue to speed up, then Sterling would rise as the outlook or the nation’s economy improves.

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TAGS: Japanese Yen Forecasts Pound Yen Forecasts