would B&W work with cheap japanese recievers?

I am trying to upgrade an old Yamaha HT receiver, 85Wx5 with equally cheap speakers.

Don't want to buy an upmarket receiver yet as they generally don't offer HDMI switching. But would like to get started with speakers, like two front B&W 700 series.

Does this make sense? Or should I upgrade the receiver/speakers togethter.
If you know what speakers you want for sure, then go for it.

I've used CDM, 600 and 300 series speakers with HT Receivers for years.
Go ahead. Your receiver will be able to drive them just fine. As a general rule, it's better to upgrade speakers first, unless you've got a truly underpowered amp that won't be able to drive the speakers you want. Yamaha's power ratings tend to be pretty honest, so I wouldn't worry about the combination you're suggesting.
We ran B&Ws with HK receivers back in the seventies and thought they were a very good match.
I would suggest you upgrade the speakers and keep the reciever. Then if you feel a need for improvement, look into buying a reasonably priced, nice two channel amp (like a used NAD for $300). You can easliy bypass the front two speaker amps in the reciever.