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Tokyo / Reuters
Bank of Japan (BOJ) Governor Haruhiko Kuroda said inflation could be affected if the yen continued to rise excessively, leading to further easing measures to meet the central bank’s price target, the Wall Street Journal reported.
Kuroda also told the paper that the BOJ was not targetting the exchange rate but that he would continue to monitor the yen’s movements.
Kuroda’s comments on how the yen could affect inflation and monetary policy are his most explicit since the Japanese currency started rising versus the dollar this year and could fuel speculation that the BOJ will ease policy when it meets next week.
“If excessive appreciation continues, that could affect not just actual inflation, but even the trend in inflation through its impact on business confidence, business activity, and even through inflation expectations,†Kuroda told the newspaper in an interview..
“And as I always emphasise, if necessary to achieve 2 percent inflation target at the earliest possible time, we would not hesitate to take further easing measures,†he said.
The BOJ’s next two-day policy meeting ends on April 28. Policymakers will likely debate the possibility of easing monetary policy further at this meeting, sources familiar with their thinking told Reuters earlier this month.
Kuroda said in the interview the BOJ could “technically and theoretically†lower interest rates at least to minus 0.4 percent from minus 0.1 percent currently.
The BOJ’s adoption of a massive asset-buying programme, dubbed “quantitative and qualitative easing,†in April 2013 was intended to spur inflation expectations, and in turn, encourage households and firms to spend.
That has failed to materialise, forcing the central bank to add negative interest rates in January to accelerate inflation toward its ambitious target of achieving 2 percent inflation in the first half of fiscal 2017.
The yen has gained more than 10 percent against dollar so far this year as investors seek the currency as a safe haven.
A strong yen tends to worry Japanese policymakers because it reduces inflationary pressure by lowering import prices. Yen gains also weighs on corporate earnings, which could encourage companies to curb wages and capital expenditure.
BOJ is the central bank of Japan. Like most modern Japanese institutions, the Bank of Japan was founded after the Meiji Restoration.
Prior to the Restoration, Japan’s feudal fiefs all issued their own money, hansatsu, in an array of
incompatible denominations, but the New Currency Act of Meiji 4 (1871) did away with these and established the yen as the new decimal currency, which had parity with the Mexican silver dollar.
The former han (fiefs) became prefectures and their mints became private chartered banks which, however, initially retained the right to print money. For a time both the central government and these so-called “national†banks issued money.