TOKYO – The yen’s recent rapid and one-sided fall is “bad” for the Japanese economy, according to Bank of Japan Governor Haruhiko Kuroda, after the currency touched a new 32-year low against the US dollar on Wednesday.
Kuroda told a parliamentary session that the yen’s rapid depreciation makes business planning difficult for Japanese firms.
However, he added that if the yen continues to fall, it is a positive for the economy.
“Currencies should change steadily, reflecting economic and financial fundamentals,” Kuroda said at a Budget Committee meeting in the House of Councillors.
“The yen’s recent fall has been swift and one-sided. This type of yen weakness makes it difficult for businesses to develop business strategies and increases uncertainty, which is bad for the economy and unfavorable “He stated.
A weak yen is generally appreciated by Japanese exporters since it increases their yen-based international revenues. However, it raises import costs for resource-poor Japan.
Market participants consider the increasing interest rate differential between Japan and the United States as a signal to sell the low-yielding yen for the US dollar, as the Federal Reserve is projected to continue raising rates.
In contrast, the BOJ has not changed its stance on keeping ultra-low interest rates to sustain an economy that, according to Kuroda, is under pressure from increased commodity prices.
The yen has dropped drastically against the dollar, recently trading in the 149 range, exceeding the level that prompted Japanese authorities to intervene last month.
Finance Minister Shunichi Suzuki’s vocal concerns of fresh yen-buying, dollar-selling intervention persist in the market.
“We are closely monitoring foreign exchange fluctuations more regularly,” Suzuki said to reporters this morning. “We are prepared to act based on our consistent point of view.”
Suzuki has warned of “decisive” action against excessive currency volatility.
He stated at a parliamentary session on Tuesday that Japan’s entry into the market in September was a crucial move.
Source: Kyodo news