Tokyo, 17 October, /AJMEDIA/
Bank of Japan Governor Haruhiko Kuroda on Monday reiterated his unwavering commitment to maintaining ultralow rates to support the fragile economy, even as the finance minister warned again of “decisive” action to stem volatile yen movements.
Kuroda’s comments at a parliamentary session came after the yen plunged to its lowest level in 32 years versus the U.S. dollar, reflecting the widening monetary policy gap between Japan and the United States. U.S. President Joe Biden has said he is “not concerned” about the strength of the dollar.
The seemingly mixed massages by Japanese authorities show the difficulties faced by Japan.
The BOJ, on the one hand, takes the view that the current round of cost-push inflation is not sustainable and monetary easing is necessary to ensure its 2 percent target is achieved stably accompanied by wage increases.
But the weaker yen, a byproduct of the BOJ’s dovish stance, has inflated import costs to the detriment of the Japanese economy. The government is preparing a comprehensive economic package, which will include inflation-relief steps.
“Japan’s economy is in the midst of recovery from COVID-19. Higher commodity prices, on the back of the situation in Ukraine, have been leading to an outflow of income from Japan to overseas, adding downward pressure on the economy,” Kuroda told a session of the lower house budget committee.
“For now, we think it appropriate to continue with monetary easing because it’s necessary to support the economy and achieve our inflation target in a sustainable and stable fashion accompanied by wage growth,” Kuroda said.
The yen was trading near 149 to the dollar on Monday. It was far from 145.90, the level at which Japan intervened in the market in September via its first yen-buying, dollar-selling operation since 1998.
Despite persisting caution about another round of intervention, the yen has continued to slide against the dollar in recent days.
“If we see excessive volatility caused by speculative moves, we will take decisive action. There is no change in this view at all,” Finance Minister Shunichi Suzuki told reporters.
Japan’s core consumer inflation hit 2.8 percent in August and Kuroda said it will likely rise further toward year-end, partly due to the weaker yen. But the headline inflation figure will undershoot the BOJ’s 2 percent target in the next fiscal year, he added.
Prime Minister Fumio Kishida said during the parliamentary session that he supports efforts by the BOJ to continue work toward attaining the inflation target.
