BOJ’s Wakatabe says yen’s recent fluctuations too rapid, one-sided

  • Wakatabe: No inconsistency in government, BOJ yen policy
  • Need to see some core inflation measures hover around 2%
  • The BOJ will change policy when inflation is sustained at 2%

WASHINGTON, Oct 15 (Reuters) – Bank of Japan Deputy Governor Masazumi Wakatabe said on Saturday the yen’s recent swings have been “clearly too rapid and too one-sided” and warned of possible economic damage from the collapse the currency to 32-year lows against the dollar.

Wakatabe, speaking at a seminar during the IMF-World Bank annual meeting in Washington, also said the Japanese government has made it clear that there is no discrepancy or inconsistency between its efforts to tame the yen’s excessive decline and those aimed at it the BOJ’s ultra-loose monetary policy set its inflation target of 2%.

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“Prime Minister (Fumio) Kishida supports easy monetary policy to emerge from a low-inflation environment,” Wakatabe said when asked whether the BOJ’s ultra-low interest rate policy is driving the yen lower, contradicting the government’s efforts to counter the strong yen curb falls through currency intervention.

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He referred to the Japanese leader’s recent comments to the Financial Times that the BOJ must maintain its ultra-loose policies until wages rise.

When asked about the yen’s recent sharp declines, the BOJ deputy governor said, “When it comes to exchange rate fluctuations, it’s clearly too fast and one-sided now.”

Under Japanese law, the Ministry of Finance, not the BOJ, is responsible for exchange rate policy.

Japan intervened in the FX market last month to halt the yen’s sharp decline, largely caused by policy divergence between aggressive US interest rate hikes and the BOJ’s determination to keep monetary policy ultra-loose.

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Wakatabe said the BOJ needs to maintain ultra-loose monetary policy as wage growth remains weak and inflation expectations, while rising, have yet to be firmly anchored around its 2% inflation target.

“We don’t want to go above or below the target. We would like to have a stabilized inflation rate of 2% later. Then we will consider a policy change,” Wakatabe said.

“Personally, I think…we need to see some core measures (of inflation) moving around 2% and the distribution of price changes need to be consistent with hitting our 2% target” to consider a change in ultra-loose policy , he said.

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The BOJ remains an outlier among the world’s central banks, many of which are tightening monetary policy to combat rising inflation as they focus on underpinning a fragile economic recovery.

Japan’s core consumer inflation accelerated to 2.8% in August, beating the BOJ’s target of 2% for the fifth straight month as price pressures from commodities and yen weakness mounted.

BOJ Governor Haruhiko Kuroda said in a separate seminar on Saturday that inflation is likely to fall below 2% in the next fiscal year, stressing the need to maintain ultra-loose policies.

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Reporting by Leika Kihara; Editing by Diane Craft and Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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