Watching FX moves carefully, stability is desirable

Bank of Japan (BOJ) Governor Haruhiko Kuroda is speaking on the importance of stability in the forex market, in light of the ongoing depreciation in the yen.

Kuroda said, “watching FX moves carefully,” adding that “stability is desirable.”

Additional quotes

Desirable for FX rates to move stably reflecting economic, financial fundamentals.

Don’t think weak yen reflects eroding market trust in the value of the yen.

Market’s view is that the weak yen is due to Japan importers’ dollar demand, prospects of US interest rate hikes.

Japan’s recent current account deficit reflects seasonal factors, sharp rise in cost of imports for raw material

Japan’s income surplus has kept current account balance in black, don’t think this trend will change in long run.

If Japan loses market trust in its finances, interest rates could spike and erode positive effect of BOJ’s monetary policy.

BOJ is buying necessary, sufficient amount of JGBs to keep 10-year yield around 0%, achieve its 2% inflation target.

Weak yen is positive for Japan’s economy as a whole.

Impact of weak yen could be uneven depending on sector, size of firms and economic entity.

Impact of fx moves on Japan’s economy could change as its economic, trade structure changes.

Weak yen pushes up value of Japan firms’ profits earned overseas, help boost capex and wages.

Weak yen hurts households’ real income, firms heavily reliant on imports.

Current cost-push inflation that is not accompanied by wage hike has a negative impact on Japan’s economy, won’t lead to stable achievement of BOJ’s price goal.

BOJ will maintain its powerful monetary easing to support corporate profits, create positive economic cycle.

Due to structural change in Japan’s economy, benefits of weak yen now come mostly from expansion in corporate profits rather than increase in export volume.

Japan has nothing to benefit from worsening terms of trade blamed on rising energy prices, so watching impact carefully.