GBP/JPY strengthens above 199.00 on renewed Japan tariff uncertainty

• GBP/JPY trades in positive territory around 199.20 in Tuesday's early European session.
• Japan's Akazawa said he had a phone call with US Commerce Secretary Lutnick. 
• Concerns about UK fiscal risks might cap the GBP's upside. 

The GBP/JPY cross gains momentum to near 199.20 during the early European session on Tuesday. The Japanese Yen (JPY) softens against the Pound Sterling (GBP) on trade woes after US President Donald Trump reiterated that he plans to impose 25% tariffs on goods from Japan. 

Trump said late Monday that he plans to impose 25% tariffs on goods from Japan in the latest development of his chaotic trade war.  Japan's top trade negotiator, Ryosei Akazawa, said on Tuesday that he had a phone call with US Commerce Secretary Howard Lutnick for 40 minutes, adding that he agreed to actively engage in trade negotiations. 

However, Japanese officials kept defending what needed to be defended. Akazawa further stated that the automobile sector is the core of Japan's economy and cannot tolerate fact 25% tariff on automobiles, as auto parts, is inflicting huge losses on Japanese firms. The tariff uncertainty is likely to undermine the Japanese Yen and create a tailwind for the cross in the near term.

On the other hand, the fresh escalation in United Kingdom (UK) fiscal risks might cap the upside for the Pound Sterling. Last week, UK Chancellor of the Exchequer Rachel Reeves breached her own fiscal rules by raising the standard allowance for Universal Credit, which is estimated to raise the financial burden by £4.8 billion by fiscal year 2029-2030. According to a Barclays analysis, the UK government would most likely need to raise taxes in the Autumn Budget to address rising budgetary concerns.