BOJ Warns Excessive Yen Volatility Could Hurt Growth

A senior Bank of Japan (BOJ) official warned that the yen’s excessive volatility could hurt economic growth, following a slide to the currency’s weakest against the dollar in six years.

“Short-term, excess volatility in currency moves could heighten uncertainty over the outlook and make it difficult for companies to create business plans,” BOJ executive director Shinichi Uchida told parliament on Monday.

“It’s desirable for currency rates to move stably reflecting economic and financial fundamentals,” Uchida added. “That’s a policy confirmed by G7 and G20 countries.”

Uchida said that the central bank will maintain ultra-loose monetary policy since the recent spikes in inflation were driven by fuel prices, which could hurt Japan’s economic recovery, instead of low borrowing costs.

Last week, Uchida underlined that Japan’s low interest rates were reflective of the country’s slow economic growth and subdued inflation.

The yen was briefly above 125 versus the dollar on Monday as traders reacted to the Federal Reserve’s outlook for aggressive interest rate hikes, spurring concerns of risks for Japan’s import-dependent economy.

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