Tokyo, “Quite sharp” moves by the yen could hurt businesses’ business plans, Bank of Japan Governor Haruhiko Kuroda said on Monday. This is his strongest warning yet about the risks that come with the currency’s depreciation.
A weak yen is good for the economy because it increases the value of the profits Japanese businesses make outside of Japan. Kuroda said there had been no change in his view.
Companies could be hurt by how quickly the yen dropped against the dollar, from about 110-116 yen to 125-126 yen.
In parliament, Kuroda said that the recent fall in the yen, which dropped about 10 to the dollar in about a month, could make it hard for businesses to set business plans. “That’s a big change,” he said.
So, “we need to think about the bad things that happen when there’s not enough money in the country.”
Traders bought the yen because of the comment, which helped the dollar fall by 0.2% to 126.25 yen on Monday.
On the other hand, Kuroda said that the BOJ needs to keep pumping money into the economy to keep it from faltering.
US : Japanese interest rate differences are expected to widen, which has sparked a two-decade low for the yen against the dollar. The BOJ is expected to keep interest rates low even as the Federal Reserve plans to keep raising rates.
Former currency diplomat Kuroda has always maintained that a weak dollar is good for the economy, despite lawmakers’ concerns that a weaker yen will harm the economy by raising already high import prices for fuel and food.
His new comments are more in line with those of Finance Minister Shunichi Suzuki, who said on Monday that the recent fall in the yen could hurt the economy.
It’s not good for the yen to be weak right now because businesses haven’t raised prices and wages enough. “In fact, it’s a bad drop in the yen.”
Suzuki didn’t say anything when asked if Tokyo was willing to intervene in the currency market to stop the yen from falling. This is what Suzuki said:
As head of Japan’s biggest business lobby, Keidanren, Masakazu Tokura has long been an advocate of the weak yen. However, when the yen was strong in the past, Japanese businesses moved production outside of the country, which weakened the benefits of a weaker currency on exports and raised the cost of energy imports.
“In the past, when the yen fell, the trade balance, the current account, and the economy were all good.” “It’s not as simple as it was.”
Tokura also said that it was too soon for the central bank to think about changing monetary policy in order to change the way the currency moves.
Norinchukin Research Institute’s chief economist said: “Kuroda may have aligned his view a little more closely with that of the finance minister so that markets don’t think the two of them don’t agree on this.”
But I don’t think the BOJ will do anything to change the value of the Japanese yen, because that’s not part of its job.
