BOJ policymakers warned of economic damage from excessive yen movements at April meeting

  • Some BOJ members warned of damage from excessive FX moves – minutes
  • Member says weak yen is good for Japan’s economy – minutes
  • Board divided on risk of overshooting inflation outlook
  • BOJ reinforced commitment to keep rates low at April meeting
  • Government Spokesman Says Fast FX Moves Undesirable

TOKYO, June 22 (Reuters) – Some members of the Bank of Japan’s board feared excessive currency volatility could disrupt companies’ business plans, minutes from the April meeting showed. of the bank, underscoring the challenge for policymakers in the face of the sharp drop in the yen.

But many board members stressed the need to maintain the BOJ’s massive stimulus package to support a still-fragile economy, minutes released Wednesday showed, a sign they saw no need to change. Japan’s ultra-low interest rates to stem the fall of the yen.

The BOJ needs to communicate to markets that its monetary policy is aimed at ensuring price stability, not controlling exchange rate movements, some members said.

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“A few members said that excessive fluctuations in the foreign exchange market over a short period, such as those observed recently, would increase uncertainty about the future and make it more difficult for companies to formulate their business plans,” the report said. minutes.

One member said a weak yen benefits the economy at a time like today when the output gap was still wide and core inflation was “extremely low”.

At the April 27-28 meeting, the BOJ reinforced its commitment to keep interest rates ultra-low by pledging to buy unlimited amounts of bonds daily to defend its yield target, triggering another sell-off. of the yen. Read more

The weak yen has become a new challenge for Japanese policymakers as it hurts the economy by inflating the already rising costs of importing fuel and raw materials.

The yen plunged Wednesday morning to a new 24-year low of 136.71 to the dollar, as investors continued to focus on the contrast between the BOJ’s ultra-accommodative policy and plans to hike rates by the US Federal Reserve to fight soaring inflation.

It was last trading around 136.32 to the dollar.

“Currency stability is important, so rapid fluctuations are not desirable,” Deputy Chief Cabinet Secretary Seiji Kihara told a regular news conference on Wednesday when asked about the new low in the yen. He declined to comment directly on currency levels.

As inflation exceeded the BOJ’s 2% target in April for the first time in seven years, Governor Haruhiko Kuroda said the bank would not change its ultra-loose policy unless price hikes are more driven by high demand and accompanied by higher wages.

At the April meeting, some BOJ board members pointed to the risk that inflation could beat expectations, if wage hikes pick up pace and add to upward pressure on the hikes. extended commodity prices, according to the minutes.

But others disagreed.

“The challenge for monetary policy in Japan was not to curb inflation, as in the case of the United States and Europe, but to overcome inflation that was still too low,” said an MP.

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Reporting by Leika Kihara; Additional reporting by Ju-min Park Editing by Chang-Ran Kim & Shri Navaratnam

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