The GBP/JPY faced pressure as the Japanese Yen strengthened, driven by expectations of a rate hike from the Bank of Japan (BoJ). Recent surveys show that 90% of economists believe the BoJ will raise interest rates to 0.75%, up from 53% last month. Currently, the British Pound is trading lower against the Yen, around 208.40, after reaching its highest point since August 2008. Analysts expect rates to climb to at least 1.00% by next September, largely due to rising inflation in Japan.

Bank Of England Rate Decision

In the UK, the Bank of England (BoE) is expected to announce a rate decision soon, with many predicting a quarter-point drop. Most economists foresee the Bank Rate being lowered to 3.75% in December, influenced by decreasing inflation and slow economic growth. Key UK economic indicators, such as GDP, industrial production, and consumer inflation expectations, will be closely watched. These could affect opinions on the upcoming BoE decision. Meanwhile, the Japanese Yen has remained strong against major currencies, especially the Australian Dollar. With both the Bank of Japan and the Bank of England meeting next week, we are witnessing a clear divergence in monetary policy. The market expects a rate hike from the BoJ and a rate cut from the BoE, creating a bearish scenario for GBP/JPY, which is currently around 208.40. The BoJ’s potential for a more aggressive stance isn’t just speculation; it is supported by recent data. Japan’s Core CPI for November 2025 was 2.9%, marking the 20th consecutive month it has surpassed the BoJ’s 2% target. This ongoing inflation strengthens the belief that Governor Ueda will increase the short-term rate to 0.75%, as suggested by polls.

Anticipation In The UK

In contrast, the situation in the UK bolsters the argument for a BoE rate cut to 3.75%. The latest data from the ONS revealed UK inflation dropped to 3.1% in November 2025, easing pressure on the central bank. Coupled with recent GDP figures showing only a 0.1% increase in the economy for the third quarter, the BoE has a clear reason to stimulate growth. For derivative traders, this scenario encourages strategies that could benefit from a decline in GBP/JPY. There is a strong case for purchasing put options to take advantage of potential downturns ahead of next week’s central bank announcements. Options market data backs this, with one-month risk reversals for the pair reaching -1.2, showing a clear preference for puts over calls. We recall the significant strengthening of the JPY in late 2023 and early 2024 when the BoJ began shifting away from its ultra-loose policy, causing major movements in Yen pairs. Before we respond to next week’s central bank decisions, we will be monitoring UK GDP data released this Friday. A weak report could cement expectations for a BoE rate cut and lead to further declines in GBP/JPY. Create your live VT Markets account and start trading now.

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