GBP/JPY attracts some buyers above 198.50 as Japan's election outcome casts doubt on BoJ's rate hike plans

• GBP/JPY strengthens to near 198.75 in Monday's early European session, adding 0.70% on the day. 
• Political uncertainty in Japan exerts some selling pressure on the JPY. 
• The hawkish comments from the BoE policymaker underpin the Pound Sterling. 

The GBP/JPY cross gains momentum to around 198.75 during the early European session on Monday. The Japanese Yen (JPY) edges lower amid political uncertainty after Japan's ruling Liberal Democratic Party (LDP) lost its majority at Sunday's national election. 

Japan's ruling coalition has lost its parliamentary majority at Sunday's national election, raising uncertainty about the next government's makeup and the Bank of Japan's (BoJ) rate hike plan, weighing on the Japanese Yen (JPY). The BoJ interest rate decision on Thursday will be closely watched. Although Governor Ueda preemptively ruled out a rate hike for this meeting, markets expect a possible rate hike in December or January. 

Nearly 86% of economists polled by Reuters anticipate the Japanese central bank to leave its rates unchanged at its October meeting on Thursday. Izumi Devalier, chief Japan economist at Bank of America, noted that while political uncertainty and instability could delay rate hikes, the BoJ cannot ignore sustained weakness in the JPY.

On the other hand, Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann, an outspoken hawk, said on Thursday, "It would be premature to cut rates if you have structural persistence in the relationship between wages and price formation." The hawkish remarks from the BoE policymaker could provide some support to the Pound Sterling (GBP) in the near term.