GBP/JPY remains inside the woods above 182.00 despite dovish BoJ

• GBP/JPY is oscillating in a narrow range above 182.00 despite a dovish BoJ Summary of Opinions.
• BoJ Summary of Opinions conveyed that it is premature to shift policy as smaller firms becoming keen to hike wages and invest more.
• UK’s core inflation is in the wrong direction despite consistent policy-tightening by the central bank.

The GBP/JPY pair has turned sideways above 182.00 despite the release of the Bank of Japan (BoJ) Summary of Opinions conveyed that further monetary policy easing is highly required to achieve inflation steadily above 2%.

As per the BoJ Summary of Opinions, it is premature to shift policy as smaller firms become keen to hike wages and invest more, as reported by Reuters. The BoJ needs to focus on wage-push inflation rather than banking upon cost-push inflation to achieve sustainable 2% inflation. However, one of the policymakers favored an early revision of the Yield Curve Control (YCC) citing the need to prevent sharp fluctuations in interest rates. The statement looks contrary to BoJ Governor Kazuo Ueda who believes no tweak in current interest rate policy for now to achieve stable 2% inflation.

Meanwhile, further upside in the Pound Sterling is widely anticipated as the Bank of England (BoE) raised interest rates by a hefty percentage last week to tame inflationary pressures. May’s headline inflation remained higher than expected as food inflation is still near 45-year high levels. While core inflation hit fresh highs at 7.1%, supported by tight labor market conditions.

UK PM Rishi Sunak and BoE Governor Andrew Bailey turned uncomfortable as core inflation is in the wrong direction despite consistent policy-tightening by the central bank. Investors are anticipating that the promise of halving United Kingdom inflation by year-end given UK Rishi Sunak would be missed.