By Leika Kihara
TOKYO -The benefits of a weak yen outweigh the demerits for Japan’s export-oriented economy, central bank policymaker Asahi Noguchi said on Thursday, brushing aside the view the currency’s recent decline would hurt the economy by boosting import costs.
Unlike other countries worried about surging inflation, Japan’s primary goal is to end deflation and prop up inflation to more desirable levels, Noguchi said.
A weak yen is more favourable for achieving this goal than a strong yen, which would push down prices and hurt exports, he added.
“It’s true some sectors could suffer from a weak yen. But as a whole, the merits of a weak yen outweigh the demerits,” Noguchi told a news conference.
The remarks echo those of Bank of Japan Governor Haruhiko Kuroda, who has consistently preached the benefits of a weak yen such as the boost it gives to Japanese firms’ overseas profits.
Once welcomed as giving a boost to exports, a weak yen has become a headache for Japanese policymakers as it inflates the cost of fuel and raw material imports, which are already soaring due to the war in Ukraine.
Some analysts and lawmakers have blamed the BOJ’s ultra-low interest rate policy for fuelling unwelcome yen declines.
Noguchi said Japan’s core consumer inflation may exceed the central bank’s 2% target from April on rising energy costs and the dissipating effect of past cellphone fee cuts.
But with the increase clearly driven by external factors rather than a recovery in domestic demand, the BOJ must keep monetary policy ultra-loose to support the economy, he said.
“Japan is not experiencing the kind of high inflation seen in many other countries,” Noguchi said in a speech prior to the news conference.
“In a country still mired in a sticky deflationary mindset, it will take significant time to stably achieve our 2% inflation target and justify a withdrawal of stimulus,” he said.
Japan has not been immune from surging fuel and commodity prices with wholesale inflation hitting record highs. Analysts also expect consumer inflation to hit or even exceed the BOJ’s 2% inflation target as early as this month.
The proportion of Japanese households expecting prices to rise a year from now has hit a 14-year high, a central bank survey showed on Thursday, as inflationary pressures from rising raw material costs grew.
(Reporting by Leika Kihara; Editing by Jacqueline Wong and Sam Holmes)
