British Pound edges down against Japanese Yen on hawkish BoJ bets

• The British Pound ticks lower against the Japanese Yen as the BoJ is expected to remain on a monetary tightening path.
• Investors are confident that the BoJ will raise interest rates at the September meeting.
• Financial markets await the UK employment and CPI data.

The British Pound (GBP) faces mild selling pressure against the Japanese Yen (JPY) during the European trading session on Friday. The GBP/JPY pair edges down as the Japanese currency outperforms its peers amid firm expectations that the Bank of Japan (BoJ) will raise interest rates in the September policy meeting.

According to a report from Reuters, three sources familiar with the matter said that the BoJ IS set to raise interest rates as soon as September and is likely to hike more aggressively thereafter than the current pace of roughly twice a year.

The BoJ Summary of Opinions (BoJ) of the July meeting also showed that a majority of board members supported an upward monetary policy path after leaving interest rates unchanged at 1%.

Meanwhile, investors seek fresh remarks from Japan’s Ministry of Finance (MoF) regarding whether there would be more United State (US)-Japan joint intervention to counter excessive volatility in the Japanese currency. In late July, the US-Japan jointly intervened to prop up the Yen.

On the British currency front, financial markets shift their focus to the United Kingdom (UK) employment data for three months ending June and the Consumer Price Index (CPI) data for July, which will be released next week.

Investors will pay close attention to both data sets to get fresh cues about the Bank of England’s (BoE) monetary policy outlook.

Currently, financial markets are not anticipating any BoE interest rate hike in the near term.

BoE seen holding Bank Rate despite firmer UK growth

Analysts at Societe Generale argue that the latest data on UK activity is unlikely to shift the monetary policy outlook. They note that "even though GDP was slightly stronger than the BoE forecast, we don’t think it changes their calculus," as underlying dynamics remain consistent with a gradual cooling in the economy. In their view, "slack continues to build in the labour market, putting downward pressure on wage growth," and both Societe Generale and the BoE "believe the second half of the year is likely to experience softer growth that should limit firms’ pricing power to pass on their higher costs." Against this backdrop, the bank expects policy to stay on hold, stating that "if energy prices remain as they are, we believe the BoE will keep Bank Rate at 3.75% throughout 2026."