Bank of Japan governor Haruhiko Kuroda calls for stable yen
Kuroda warns that sharp declines in the Japanese currency are hurting profits for domestic companies by raising import costs
Bank of Japan governor Haruhiko Kuroda said a stable yen is crucial for the country's business sector, nodding to complaints from some companies that rising import costs from sharp yen declines were starting to hurt their bottom line.
But he stressed that the reversal of past "excessive" yen gains is prompting some Japanese companies to boost domestic investment instead of shifting production overseas, suggesting that he still broadly sees yen weakness as a welcome trend.
"I agree that from a business perspective, exchange-rate stability is extremely important," Kuroda said yesterday in a meeting with business executives in Osaka, western Japan.
Kuroda said it was difficult to control yen levels with Japanese policy alone because currency rates can move on various factors, such as economic developments in the United States, Europe and Asia.
"Still, there's solid coordination between the government and the Bank of Japan. From this standpoint, we will do our best to ensure currency stability," he said.
The US dollar rose to a six-year high against the yen earlier this month on expectations that the United States Federal Reserve may raise interest rates faster than the market had priced in.
A weak yen is seen as a boon for Japanese exporters, including those based in Osaka such as electronics giant Panasonic, whose profits have climbed as their goods have become lower-priced and more attractive in overseas markets.
But exports have failed to pick up despite the weak yen, disappointing policymakers who had hoped rising overseas shipments would buoy a fragile economic recovery and help offset the impact of a slump in domestic demand after a sales tax rise in April.
Some lawmakers and market analysts fret that further yen declines may do more harm than good by boosting the cost of fuel and raw material imports for Japanese firms.
Kuroda reiterated his optimistic view of the economy, saying it will continue to recover moderately as the pain from the April tax rise on consumption gradually subsides.
While acknowledging that external demand has been weak and some geopolitical risks were of concern, he said robust household and corporate spending would underpin the recovery.
On monetary policy, Kuroda stressed the bank's readiness to expand stimulus further "without hesitation" should risks threaten achievement of the bank's price target.
"Japan's economy has been on a path suggesting that the price stability target of 2 per cent will be achieved as expected," he said in the speech to Osaka business executives.
"We are only halfway there, however, and the bank will continue with quantitative and qualitative easing, aiming to achieve the price stability target of 2 per cent, as long as it is necessary for maintaining that target in a stable manner," he said.
The bank has stood still on monetary policy since deploying an intense burst of stimulus in April last year, when it pledged to double base money via aggressive asset purchases to achieve its 2 per cent inflation target in roughly two years.
