Bank of Japan to scrutinise yen moves in guiding policy: Ueda

BANK of Japan (BOJ) governor Kazuo Ueda said on Tuesday (May 7) the central bank will scrutinise recent yen moves in guiding monetary policy as they could significantly affect the economy and prices.

Speaking to reporters after meeting Prime Minister Fumio Kishida, Ueda said he discussed with the premier recent currency moves, as well as economic developments after the BOJ’s decision to end negative interest rates in March.

“I mentioned that in general, currency moves could have a potentially major impact on the economy and prices, and that the BOJ will therefore scrutinise the yen’s recent falls in guiding policy,” Ueda said.

Ueda also said the central bank will keep a close eye on how the yen’s moves could affect Japan’s underlying inflation.

After making a historical exit from its massive stimulus in March, the BOJ kept interest rates around zero in April and signalled its readiness to hike borrowing costs later this year.

But traders sold off the yen on Ueda’s post-meeting comments that the weak yen would not immediately boost inflation in a way that warrants additional rate hikes, causing the currency to hit new 34-year lows.

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As a result, Japanese authorities are suspected to have intervened in the currency market last week to prop up the yen.

Ueda has repeatedly said the BOJ will not explicitly target the yen in conducting monetary policy, and will respond only if the currency’s declines lead to a sharp rise in inflation in the long run.

The prime minister and BOJ governor hold regular meetings, usually about once every quarter, to exchange views on the economy and prices. Kishida and Ueda last met bilaterally on Mar 19. REUTERS