The executive director of the Central Bank of Japan (BOJ) said the central bank would maintain its loose monetary policy as the recent rise in inflation was driven by fuel costs and could affect Japan’s economic recovery.
Speaking in parliament on Monday, Shinichi Uchida also warned that the highly volatile movement of the yen could hurt growth.
The statement referred to the currency's fall which approached the price of 125 against the US dollar, thus raising concerns about broader risks to the import -dependent Japanese economy.
According to Uchida, it is desirable for the currency to move stably reflecting the economic and financial fundamentals in line with the policies endorsed by the G7 and G20 countries.
In the short term, excessive volatility in currency movements can increase uncertainty over prospects and make it difficult for companies to make business plans.
The US dollar rose above 125 against the yen on Monday, hitting its latest high since June 2015 as expectations of an aggressive interest rate hike by the Federal Reserve (Fed) highlighted the widening rate gap between the United States and Japan.
Meanwhile, the BOJ also lowered its assessment for most of the country’s regional economies and Governor Haruhiko Kuroda warned of very high uncertainty over the impact of the Ukraine and Russia crises.
