- Exchange rates should move steadily, reflecting fundamentals – Kuroda
- No change to view weak yen positive for Japan’s economy – Kuroda
- BOJ poised to defend yield cap again – Kuroda
TOKYO, April 5 (Reuters) – Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Tuesday the yen’s recent moves have been “quite rapid,” joining a chorus of policymakers who have warned that a sharp fall in the currency could affect the country’s imports. dependent economy.
The remark was Kuroda’s strongest warning on the yen’s movements since the currency’s plunge to a six-year low last week, and a sign that the BOJ shares the government’s concerns about the potential damage to business sentiment from sharp falls in the yen .
“Recent (yen) movements have been fairly rapid,” Kuroda told parliament, adding that the BOJ is closely monitoring currency movements due to their “enormous” impact on the economy and prices.
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“It is extremely important that exchange rates move steadily and reflect economic and financial fundamentals,” Kuroda said.
However, Kuroda also reiterated his view that a weak yen is benefiting the overall Japanese economy, contrary to some market sentiment that its decline is doing more harm than good to the economy by driving up import costs.
The dollar fell below 122.4 yen on Kuroda’s comment before recovering to nearly 123 yen on Tuesday, still below the six-year high of over 125 yen set last week.
“Market participants see Kuroda as a firm believer in the benefits of a weak yen,” Makoto Noji, chief currency strategist at SMBC Nikko Securities.
“Today’s comments could at best have been Kuroda’s attempt to lean a little closer to the government, which has warned about the side effects of a weak yen.”
A weak yen, once welcomed as a boost to exports, is a headache for Japanese policymakers as it pushes up the cost of fuel and commodity imports, which are already soaring due to the war in Ukraine.
Some analysts and lawmakers have blamed the BOJ’s ultra-low interest rate policy for fueling the yen’s unwanted decline.
Kuroda reiterated the need for the BOJ to keep monetary policy ultra-loose even as rising fuel costs are expected to push consumer inflation close to its 2% target.
Unlike other western economies, Japan has not experienced sharp wage increases in tandem with inflation, he added.
“We will patiently maintain strong monetary easing to support an economy still in the midst of recovering from the impact of the COVID-19 pandemic,” Kuroda said.
While serving as a top currency diplomat from 1999 to 2000, Kuroda led several rounds of yen-selling interventions to combat the sharp rise in the yen that was causing an economic slump.
Asked about the experience, Kuroda said it is “difficult to measure” how currency intervention affects markets.
However, the BOJ stands ready to use a powerful tool to prevent long-term interest rates from rising too much, he added.
The BOJ last week offered to buy an unlimited amount of 10-year Japanese government bonds to defend an implied 0.25% yield cap, a move that weakened the yen as investors focused on the widening interest rate gap between Japan and the US United States focused.
Kuroda said the BOJ will continue to defend the ceiling as bond yields breaching this level could hurt business investment and the broader economy.
“If long-term interest rates rise rapidly, we are ready to use such market operations,” Kuroda said, signaling the bank’s willingness to re-enter the market if necessary.
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Reporting by Leika Kihara and Tetsushi Kajimoto; Additional reporting by Daniel Leussink and Kantaro Komiya; Edited by Kenneth Maxwell and Edwina Gibbs
Our standards: The Thomson Reuters Trust Principles.
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