Bank of Japan Governor Haruhiko Kuroda on Friday reiterated his view a weak yen benefits the economy as a whole, brushing aside concern the currency’s slide to multi-year lows could do more harm than good to the resource-poor, import-reliant country.
Due to structural changes in Japan’s economy, the benefit from a weak yen comes more through an increase in the value of profits companies earn overseas, rather than a rise in export volume, Kuroda said.
There’s no change now to my view a weak yen is generally positive for Japan’s economy, he told parliament.
The yen was headed for its worst week in two years, pummelled by Japan’s rising import costs and ultra-low low interest rates. It fell to a fresh multi-year low of 121.84 to the dollar on Friday.
Kuroda said the recent rise in import prices was driven mostly by global commodity inflation, rather than the weak yen.
While consumer prices may accelerate to around the BOJ’s 2 per cent target from April, the central bank is in no rush to withdraw stimulus as any increase in inflation must be accompanied by steady rises in wages, jobs and corporate profits, Kuroda said.
The Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes energy items, rose 0.8% year-on-year in March, the fastest pace since December 2019. It was also quicker than a median market forecast for a 0.7 per cent gain and the 0.5 per cent rise in February.
While Japan’s recovery from the pandemic remains slow, reopening Western economies have propped up global inflation before Japan could reopen its economy, said Toru Suehiro, senior economist at Daiwa Securities.