Bank of Japan Deputy Governor Ryozo Himino said that currency fluctuations affect inflation in a sustained way, and therefore the Central Bank should be "very vigilant" about the possible impact of the value of the national currency on the economy. Meanwhile, he warned that the Central Bank should not automatically set rates in response to yen moves, as other factors such as economic and price prospects need to be taken into account.
"Fluctuations in the yen have different effects on economic activity. It also has a broad and sustained impact on inflation, in addition to the direct impact on import prices. That's why we need to be more vigilant," Himino said.
The significant drop in the yen, which reached a new 34-year low against the US dollar on April 29, puts pressure on the government, whose ratings have fallen as the collapse of the national currency has led to an increase in the cost of living for households. Meanwhile, the head of the Bank of Japan, Ueda, ruled out the possibility of using monetary policy to directly influence the yen, but pointed to the possibility of raising rates if a weak yen leads to higher inflation than expected. Today, USD/JPY fell by 0.49% to 155.32, reaching its lowest level since May 17.