Important that FX moves reflect economic, financial fundamentals and move stably

Bank of Japan (BoJ) board member Junko Nakagawa said on Thursday, “most important is for FX moves to reflect economic, financial fundamentals and move stably.”

Further comments

See equal degree of upside, downside inflation risks.

Can exit negative rate policy when economy is strong enough to weather headwinds, demand strengthens on prospects of sustained wage growth.

Don’t have any preset idea on order, timing and interval on how to phase out ycc, negative rate as that will depend on financial developments at the time.

Can’t say now how long it will take to judge whether sustained achievement of 2% inflation can be foreseen.

Won’t comment on FX levels.

Monetary policy doesn’t directly target FX, cannot do so.

As central bank, BoJ will communicate closely with govt and scrutinize market, FX moves and their impact on japan’s economy.

We are controlling yield curve so any improvement in bond market function would be constrained to some extent.

Further tweak to YCC cannot be ruled out as option if inflation expectations heighten more, but this is not an imminent issue now.

Strong outcome in next year’s wage talks would be a necessary condition, but not sufficient one, to contemplate ending negative rates.

Want to look at various factors beyond wages in deciding future policy change.

Market reaction

USD/JPY is off the lows, trading at 147.50 on the BoJ commentary. The pair is down 0.09% so far.

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