Haruhiko Kuroda, the Governor of the Bank of Japan (BOJ), stated on Tuesday that the yen’s recent fluctuations were “rather quick,” joining a chorus of policymakers who have cautioned that strong losses in the currency could harm Japan’s import-dependent economy.
However, Kuroda reiterated his belief that a weak yen favors Japan’s economy as a whole, despite market perceptions that its slide is harming the economy by driving up import costs.
“Recent (yen) swings have been fairly quick,” Kuroda told parliament, adding that the BOJ was keeping a close eye on currency movements because they have such a “big” impact on the economy and pricing.
“It’s critical that currency rates fluctuate steadily in response to economic and financial fundamentals,” Kuroda said.
Since the beginning of March, the yen has lost nearly 6% versus the dollar, and it briefly traded over 125 yen per dollar on Monday last week, the first time it had done so since August 2015. On Tuesday, it was trading at roughly 122.5 yen.
Despite the fact that rising gasoline costs are projected to bring consumer inflation closer to the BOJ’s 2% objective, Kuroda maintained the central bank’s commitment to keeping monetary policy ultra-loose.
He went on to say that, unlike the US and other Western nations, Japan’s salaries were not rising in lockstep with inflation.
“We will maintain patiently significant monetary easing to support an economy still recuperating from the impact of the COVID-19 outbreak,” he said.
Last week, the Bank of Japan offered to buy an unlimited amount of 10-year Japanese government bonds to protect an implied 0.25 percent yield cap, weakening the yen as investors focused on the increasing interest rate difference between Japan and the US.