TOKYO (Reuters) – Bank of Japan (BOJ) Governor Haruhiko Kuroda said Tuesday the yen’s recent moves have been “quite rapid,” joining a chorus of policymakers who have warned that a sharp decline in the currency could hurt the country’s import-dependent economy.
But Kuroda also reiterated his view that a weak yen is benefiting the overall Japanese economy, contrary to some market views that its decline is doing more harm than good to the economy by driving up import costs.
“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.
“It is extremely important that exchange rates move steadily and reflect economic and financial fundamentals,” Kuroda said.
The yen is down about 6% against the dollar since early March and briefly traded above 125 yen per dollar on Monday last week – the first time since August 2015. It was trading at around 122.5 yen on Tuesday.
Kuroda also reiterated the BOJ’s determination to keep monetary policy ultra-loose even as rising fuel costs are expected to push consumer inflation close to its 2% target.
“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,” he said, addressing Parliament in a semi-annual statement on the government’s actions BOJ.
BOJ Executive Director Shinichi Uchida said in the same parliamentary session that consumer inflation is likely to rise to around 2% and stay there for some time, due to rising energy costs and the dispersive effect of cellphone fee cuts.
“Such costly inflation … could hurt the economy and weigh on trend inflation,” Uchida said. “Cost-pushing inflation alone will not help Japan achieve sustained price growth.”
Soaring fuel and commodity prices, fueled by the war in Ukraine, have pushed Japan’s wholesale inflation to record levels, prompting more businesses to pass on higher costs to households.
(Reporting by Leika Kihara; Additional reporting by Daniel Leussink; Editing by Kenneth Maxwell and Edwina Gibbs)
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