GBP/JPY steady as Japan's new leadership weighs on Yen, UK fiscal strain persists

• The Japanese Yen weakens broadly after Japan's parliament elects Sanae Takaichi as Prime Minister, ending weeks of political uncertainty.
• In her first remarks, Takaichi pledges political stability and closer coordination with the Bank of Japan to support wage-led inflation.
• UK fiscal concerns linger ahead of the November budget, while traders await Wednesday's CPI data for monetary policy clues.

The British Pound (GBP) gains traction against the Japanese Yen (JPY) on Tuesday, as the Yen weakens across the board following Japan's parliamentary vote earlier in the day that confirmed Sanae Takaichi as the country's new Prime Minister. At the time of writing, GBP/JPY trades around 203.26, after briefly touching a one-week high near 203.53 earlier in the European session.

Japan's parliament elected Takaichi, leader of the Liberal Democratic Party (LDP), after she secured 237 votes, surpassing the 233 needed for a majority in the 465-seat lower house. Her victory came after the LDP struck a coalition deal with the Japan Innovation Party (Ishin).

In her first remarks as Prime Minister, Takaichi emphasized the need for political stability to achieve a strong economy, pledging to "defend Japan's national interest through diplomacy and security." She dismissed speculation of an early election, saying "there is no time for dissolving the lower house," and stressed that "the BoJ and government must work closely."

Takaichi added that there are no immediate plans to revise the government-BoJ joint agreement, reiterating that the central bank's 2% inflation target should be met not through cost-push factors but through price gains accompanied by wage growth.

On the UK side, sentiment toward the Pound Sterling remains mixed amid escalating fiscal pressures and lingering inflation risks. The latest data showed Public Sector Net Borrowing rose more than expected in September, bringing total borrowing for the fiscal year to date to £99.8 billion, around £7 billion above the Office for Budget Responsibility's projection. The figures highlight growing strain on public finances ahead of November's budget, adding to concerns about limited fiscal space as the government faces persistent inflation and slowing growth.

Looking ahead, traders will monitor the UK Consumer Price Index (CPI) due on Wednesday, along with Japan's September trade balance for near-term cues. A stronger UK inflation print could reinforce Sterling's strength and extend GBP/JPY gains, while any rebound in Japan's exports may lend the Yen brief support.