Bank of Japan Governor Yoshida changed the caliber: Take policy action against the yen if necessary

Bank of Japan Governor Kazo Uitada said at the Diet on Wednesday (May 8) that the central bank could take monetary policy action if the yen has a significant impact on inflation, further warning of the impact of the yen's recent sharp fall on the economy.

 A weak yen could affect the economy in several ways, including pushing up the cost of imports and affecting demand for goods and services. Mr Uhda noted that while the BOJ will not seek to take direct control of the yen with monetary policy, it will carefully examine the potential impact of the yen on the economy and prices. The currency move was also one of the topics he discussed during his meeting with Japanese Prime Minister Fumio Kishida on Tuesday (May 7), suggesting that the recent fall in the yen has raised the Japanese authorities' attention for possible policy action. Ueda noted Wednesday, " Companies are becoming somewhat more active in setting wages and prices. Therefore, we need to note that the impact of exchange rate fluctuations on inflation is becoming more risky than in the past."Exchange rate movements could have a significant impact on the economy and prices, so the central bank may consider adopting monetary policy," he added."Mr Ushida's comments contrast to his remarks after the Bank of Japan's policy meeting last month, when he said the recent decline in the yen had not had a direct impact on trend inflation. That also led some traders at the time to believe that Ueda's post-meeting comments exacerbated market expectations that the Bank of Japan would not raise interest rates for a time, accelerating the yen's decline.

 The yen has fallen about 10 per cent against the dollar this year and has been trading at about 155.19 p. m. so far.

In addition, Japan's top diplomat (Masato Kanda), the Japanese, recently warned that Japan may have to act on disorderly and speculative-driven fluctuations in the foreign exchange market, reinforcing expectations that Japanese authorities are ready to intervene again to support the yen. If the exchange rate, Kanda said, can steadily reflect the fundamentals, the government has no need to intervene, " but the government may have to take appropriate action when the market cannot properly due to speculation. We will continue to take a firm attitude."The yen had fallen to a 34-year low after forecasts that Japanese authorities had conducted at least two days of intervention last week to support the yen. Bank of Japan data suggested authorities spent more than 9 trillion yen ($58.4 billion) to defend the yen, helping the yen recover from a 34-year bottom point of 160.245 to a one-month high of 151.86.