Bank of Japan Governor Kazuo Ueda warned the central bank will closely monitor yen movements as the currency weakened past 160 against the dollar to its lowest level since July 2024.
Speaking to Parliament, Ueda indicated rising import costs from the weak currency could justify interest rate increases in coming months. He emphasized that while the BOJ doesn't directly target forex rates, currency moves significantly affect economic and price developments.
"Currency market moves are obviously among factors that hugely affect economic and price developments," Ueda stated. He noted yen fluctuations now impact inflation more than previously as companies become more active in raising prices and wages.
The BOJ maintained its short-term rate at 0.75% in March while keeping its bias for tighter monetary policy. Surging oil prices from Middle East conflicts threaten to worsen inflationary pressures. Market concerns about the BOJ falling behind curve on inflation drove up Japanese government bond yields last week.
Ueda signaled the bank's commitment to steadily raise rates, warning that inappropriate adjustments could lead to inflation overshooting and long-term yield volatility.