Pound to Japanese Yen Exchange Rate Slides on Threat of Second Scottish Referendum

GBP JPY Exchange Rate Slumps on ‘IndyRef2’, Further Damage ahead on Confidence and PMI Scores

The Pound has dropped by -0.2% against the Japanese Yen today, mainly due to fears that triggering Brexit will also bring the threat of another Scottish independence referendum.

This has long been a background issue of the EU Referendum campaign and Brexit, with Scottish First Minister Nicola Sturgeon repeatedly stating that she wishes to keep Scotland in the EU for its beneficial trading conditions, among other things.

With this threat of another independence campaign coming just weeks away from the expected Article 50 trigger date, GBP investors have been sorely shaken by the development, which may continue to damage interest in Sterling as the Brexit countdown continues.

In terms of UK domestic releases, Sterling may have a hard time against the Yen this week, with consumer confidence expected to fall on Tuesday and two of three PMIs forecast to drop over Wednesday to Friday. Crucially, the majority contributing services sector is expected to slow in terms of activity over February, which could trigger a sharp GBP slide.

Japanese Yen Demand Rises as Chinese Economy Benefits Japan

The Yen has appreciated against the Pound today in the wake of an interview with Blackrock Japan Chairman Yoshiyuki Izawa, who has been optimistic about Japan’s economic future.

Speaking to The Nikkei, Izawa declared that;

‘Japanese companies are now in much better shape than they were around 2000. They have carried out restructuring to downsize their assets and focus on key businesses. They have also accelerated the globalization of their operations, which actually means a trend toward local production and local consumption of goods and services’.

Izawa also highlighted the beneficial effects of Chinese economic development on Japan;

‘Japan's exports to other Asian nations are growing, thanks to China's economic recovery, which, in turn, is boosting the economies of the Association of Southeast Asian Nations’.

Incoming Japanese data will cover capital spending in Q4, which previously slumped by -1.3%. Also due are a pair of speeches from Bank of Japan (BoJ) policymakers, which could further JPY GBP gains if they reveal hawkish tones with regard to Japanese economic policy.