BOJ's Kuroda and PM Kishida reiterate united front on forex

JAPAN'S prime minister and its central bank chief reiterated their united front on foreign exchange matters on Monday (Jun 20) after a meeting following last week's slide in the yen to a 24-year low against the US dollar.

Prime Minister Fumio Kishida said that BOJ Governor Haruhiko Kuroda expressed his concern over currency movements during the meeting, a comment that briefly strengthened the yen.

For his part, Kuroda said the government and central bank will continue to monitor currencies closely and collaborate on acting appropriately.

Kishida made no particular comments during the talks, the governor said, a remark that suggests tacit government approval of the bank's decision last week to continue with rock-bottom rates, even as they contribute to the currency's weakness.

The meeting is the latest expression of concern over movements in the foreign exchange markets by Japan's policy makers as they seek to limit the pace of the yen's slide through verbal warnings rather than direct action.

The yen strengthened to as much as 134.54 versus the US dollar after Kishida spoke, compared with 135.10 mid afternoon, before the 2 leaders finished their meeting.

"The government and the BOJ needed to show once again their cooperation" before next month's election, said Mari Iwashita, chief market economist at Daiwa Securities. "The fact that they said they will work together and act appropriately" implies there's room left for policy responses, she said.

Opinion polls over the weekend showed a further fall in public support for the prime minister as public angst builds over soaring prices ahead of an upper house election on Jul 10. Kishida is almost certain to win the vote given the splintered nature of the opposition, but he will want to perform well to shore up his leadership of the ruling party.

The BOJ's persistence with maintaining easing to support the economy and stoke stable inflation contrasts with the rate-hiking tide that is sweeping the world's central banks as they try to tackle accelerating prices. The BOJ's dovish policy stance in comparison to the hawkish Federal Reserve has been contributing to the currency's fall. BLOOMBERG

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