Image: Reuters Berita 24 English - Governor of the Bank of Japan Haruhiko Kuroda said again on Tuesday that a weak yen is good for the eco...
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| Image: Reuters |
Berita 24 English - Governor of the Bank of Japan Haruhiko Kuroda said again on Tuesday that a weak yen is good for the economy as long as it doesn't move too much. He said this after the currency fell to a new 20-year low.
Recent sharp drops in the value of the yen are driving up the prices of imported fuel and food, which were already going up. This hurts households and is becoming a political hot topic before an upper house election next month.
Kuroda echoed the warning made by Finance Minister Shunichi Suzuki earlier on Tuesday that sharp moves in the value of the yen were not good and that changes in the exchange rate should be steady and based on fundamentals.
"A weak yen is good for Japan's economy as long as the changes aren't too big," Kuroda told parliament.
"But we should be aware that the weakening of the yen could hurt households and small service-sector businesses in rural areas," he said, adding that a weak yen had different effects on different industries.
The markets have been selling the yen because they think the difference in interest rates between Japan and the U.S., which is raising rates quickly, will get bigger.
On Tuesday, the dollar reached a new 20-year high of 132.75 yen as U.S. bond yields went up due to worries about persistent inflation. So far this month, the yen has lost about 3% of its value against the dollar.
Kuroda said again that the BOJ would keep interest rates very low to help an economy that is still recovering from the pain of the coronavirus pandemic
"If we cut back on monetary stimulus too quickly, it could hurt capital spending and domestic demand, making it even harder to reach our price target," Kuroda said.
"By keeping our strong monetary easing in place for a long time, we hope to help the economy so that prices rise at the same time as corporate profits, job growth, and wages get better," he said.
