Japan’s planned tax cuts and cash transfers worth ¥600 billion annually strain finances, pressuring the JPY amid a widening rate gap with the UK.
The GBP/JPY pair consolidates around 213.00 in early European trading, failing to extend a three-day recovery. The cross remains near its weekly high but faces resistance from a stronger USD and fiscal concerns in Japan.
Japan’s government approved a two-year consumption tax cut on food to 1% from 8%, alongside ¥600 billion in annual cash transfers for low- and middle-income households. Analysts warn this will worsen Japan’s already strained fiscal position, undermining the JPY.
A persistent rate gap between Japan and major economies, including the UK, further weakens the yen. The USD’s recent gains also cap the GBP’s upside, limiting momentum in the GBP/JPY cross.