Inflation in Japan stood at 2.6%, two years above the Bank’s target of 2%, initially due to the war in Ukraine and currently due to rising food prices.
Japan’s central bank governor said Wednesday that he could consider a change in monetary policy, with a further increase in interest rates, if the recent devaluation of the yen causes an acceleration in inflation.
“Compared to past situations, exchange rate fluctuations are more likely to affect prices” for consumers, Kazuo Ueda told a committee of the Japanese Parliament.
The head of the Bank of Japan (Bank of Japanits acronym in English) added that “it is closely following the recent movements in the depreciation of the yen.”
The Japanese currency was trading this Wednesday in a range close to 154 yen per dollar, after falling to 160 yen at the end of April, for the first time in 34 years. This after Bank of Japan They have unanimously decided to maintain monetary policy.
The US dollar surpasses the 160 yen barrier for the first time since 1990
Ueda admitted that it is possible that inflation in Japan currently depends more on changes in the currency market and on “more aggressive” movements by companies when setting prices or wages.
“In some cases, this will cause underlying inflation to change. If such a situation were to occur, a monetary policy response would be necessary,” stated the governor of Bank of Japan.
Japan’s central bank raised its benchmark short-term interest rate in March to 0.1%, the first increase in 17 years but still a far cry from rates in other major economies around the world.
The yen has depreciated sharply against the dollar, among other currencies, largely due to this differential.
A weak yen tends to boost the stock market as it inflates foreign remittances from exporters, but also raises the costs of imports of energy and raw materials, on which Japan depends.
Inflation in Japan stood at 2.6% in March and has been above the 2% target set by the government for two years. Bank of Japaninitially due to climb of the cost of energyresulting from the war in Ukraine, and currently due to the increase of the price of feeding.
Source: Observadora
