In her first speech, Takaichi highlights the importance of political stability for economic strength and promises to protect national interests. She emphasizes the need to work closely with the Bank of Japan (BoJ) and dismisses any speculation about early elections or changes to the government-BoJ agreement.

UK Fiscal Pressures and Inflation Worries

The UK is experiencing financial strain, impacting the sentiment around the Pound. Public Sector Net Borrowing has reached £99.8 billion, which is higher than expected. There are ongoing worries about limited financial flexibility due to inflation and slow growth. The upcoming UK Consumer Price Index (CPI) data and Japan’s trade balance figures are crucial. Strong inflation in the UK could raise the value of the Pound, while an increase in Japan’s exports might briefly boost the Yen. The table shows how the Yen compares to other currencies, with it being strongest against the Swiss Franc. With Sanae Takaichi as Japan’s new Prime Minister, it looks like the weak Yen policy will continue. Her aim to achieve wage-led inflation suggests that the Bank of Japan is not in a hurry to raise interest rates, which sets it apart from other major central banks. This situation makes the Yen a favorable currency to sell against those that yield higher returns. We’ve seen this strategy before; the Bank of Japan was the last major central bank to move away from negative interest rates back in 2024. In October 2025, Japan’s core inflation was at 2.6%, while average cash earnings grew by only 1.7%, reinforcing the new government’s cautious approach. Therefore, we can expect the Yen to remain weak as long as wage growth is slow.

Effect on the British Pound and Central Bank Strategies

Meanwhile, the British Pound is facing its own challenges, with inflation data set to be released tomorrow. The market expects the UK’s headline CPI to be around 3.2%, which would pressure the Bank of England to keep its strict policy in place. This clear difference in central bank strategies is likely to push the GBP/JPY pair higher. However, we must consider the UK’s financial situation, especially with the November budget nearing. A recent report revealed that public sector borrowing exceeded forecasts by £7 billion, bringing back memories of market turmoil after the 2022 “mini-budget.” Any signs of fiscal trouble could limit the Pound’s strength. Given this scenario, the trend for GBP/JPY seems to be upward, as it currently trades near 203.26. We should think about strategies that can benefit from this rise, such as buying call options on the pair. Choosing options that expire in December 2025 could help capture potential gains while managing risks linked to the upcoming UK budget announcement. Create your live VT Markets account and start trading now.

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