Japan warns of need for stable currency as weak yen lifts input costs

Tokyo

JAPAN will watch currency movements carefully as exchange rate stability is important, a top government official said on Wednesday, after the yen hit a four-year low against the dollar.

The dollar has gained 4.6 per cent against the yen since its latest low hit in mid-September, amid growing bets that the United States will soon start unwinding pandemic-era policy, while Japan looks poised to keep interest rates low for some time.

The dollar earlier climbed as high as 114.585 yen for the first time since November 2017.

"Currency stability is extremely important, so we'll continue to watch market moves carefully," Yoshihiko Isozaki, the deputy chief cabinet secretary, told a news conference, when asked about the yen's fall, declining to comment on specific levels.

Japanese policymakers typically favour a weak yen, as it gives exports a competitive advantage overseas.

But the yen's recent decline, coupled with rising energy prices, has heightened concern over higher costs for households and retailers still reeling from the coronavirus pandemic.

The pain on consumers bodes ill for Prime Minister Fumio Kishida's efforts to distribute more wealth to households, a pledge he made ahead of a lower house election on Oct 31.

"For consumers, a weak yen aggravates the pain from higher commodity costs. It's particularly damaging for low-income households," said Ryutaro Kono, chief economist at BNP Paribas.

"For Japanese households who have barely seen income rise, this could turn into a big political problem and affect monetary policy down the road," he added. REUTERS