Insights 
VT 
In her initial address, Takaichi emphasises political stability for economic strength, pledging to safeguard national interests. She stresses coordinating with the BoJ and refuses early election speculations or revising the government-BoJ agreement.
Uk Fiscal Pressures And Inflation Concerns
The UK’s fiscal pressures affect Sterling’s sentiment amid rising Public Sector Net Borrowing, reaching £99.8 billion, exceeding projections. Concerns persist over limited fiscal space due to inflation and growth concerns.
Upcoming UK CPI data and Japan’s trade balance figures are key focuses. Strong UK inflation could boost Sterling, while a rise in Japan’s exports might support the Yen briefly. The table shows JPY’s strength or weakness against other currencies, with the Yen performing strongest against the Franc.
With Sanae Takaichi as Japan’s new Prime Minister, the policy of a weak Yen looks set to continue. Her focus on achieving wage-led inflation signals that the Bank of Japan will not rush to raise interest rates, reinforcing the monetary policy divergence with other major central banks. This environment makes the Yen an attractive currency to sell against higher-yielding currencies.
We have seen this policy play out before, as the Bank of Japan was the last major central bank to exit negative interest rates back in 2024. Recent data from October 2025 shows Japan’s core inflation at 2.6%, but average cash earnings are only growing at 1.7%, validating the new government’s cautious stance. Therefore, we should expect continued Yen weakness as long as this wage growth remains sluggish.
Impact On British Pound And Central Bank Policies
On the other side of the trade, the British Pound is facing its own test with inflation data due tomorrow. Market consensus expects the UK’s headline CPI to print around 3.2%, which would keep pressure on the Bank of England to maintain its restrictive policy stance. This clear difference in central bank direction should continue to push the GBP/JPY pair higher.
However, we must also factor in the UK’s fiscal situation, especially with the November budget approaching. The recent report showing public sector borrowing overshooting forecasts by £7 billion brings back memories of the market volatility following the 2022 “mini-budget”. Any signs of fiscal distress could quickly put a cap on the Pound’s strength.
Given this setup, the path of least resistance for GBP/JPY appears to be upward, currently trading near 203.26. We should consider strategies that profit from this continued rise, such as buying call options on the pair. Using options with expirations in December 2025 would allow us to capture potential upside while managing risk around the upcoming UK budget announcement.
