By Leika Kihara
TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida on Tuesday urged the central bank to maintain its ultra-loose monetary policy, brushing aside the idea of using interest rate hikes to prevent further declines in the yen.
Prospects of widening U.S.-Japan interest rate differentials have pushed the yen down to two-decade lows against the dollar, stoking fear among lawmakers that a weak currency could do more harm than good to the economy by pushing up import costs.
With the U.S. Federal Reserve eyeing aggressive interest rate hikes, some market players have speculated that Kishida’s administration may pressure the Bank of Japan (BOJ) to modify its ultra-loose monetary policy to stem further falls in the yen.
Kishida said currency levels are the consequence of various factors including economic and monetary policies.
“The BOJ is undertaking its current policy to achieve its 2% inflation target,” Kishida told a news conference.
“The government hopes the central bank continues with its efforts to achieve the goal,” he said, when asked whether the BOJ should tweak its ultra-loose policy to prevent further declines in the yen.
When asked about the yen’s recent weakness, Kishida declined to comment on specific levels but warned about the demerits of sharp currency moves.
“As for the weak yen, rapid currency moves are undesirable for many entities,” he said.
The BOJ is widely expected to keep its ultra-low interest rate targets unchanged at a two-day policy meeting that ends on Thursday.
With inflation at far more modest levels than most Western nations, BOJ Governor Haruhiko Kuroda has stressed the central bank’s resolve to keep monetary policy ultra-loose to support an economy still in the midst of recovering from the COVID-19 pandemic.
(Editing by Jacqueline Wong)
