OSAKA Japan (Reuters) - Bank of Japan Governor Haruhiko Kuroda said stable yen moves are crucial for the country’s business sector, nodding to complaints from some companies that rising import costs from sharp yen declines were starting to hurt their bottom line.
But he stressed that the reversal of past “excessive” yen gains is prompting some Japanese companies to boost domestic investment instead of shifting production overseas, suggesting that he still broadly sees yen weakness as a welcome trend.
Kuroda also dismissed the view that recent yen declines against the dollar have been too rapid, saying that he saw no problem with the current moderate pace of yen falls.
“I agree that from a business perspective, exchange-rate stability is extremely important,” Kuroda said in a meeting with business executives in Osaka, western Japan, on Tuesday.
Kuroda said it was difficult to control yen levels with Japanese policy alone because currency rates can move on various factors, such as economic developments in the United States, Europe and Asia.
“Still, there’s solid coordination between the government and the BOJ. From this standpoint, we will do our best to ensure currency stability,” he said.
At a news conference after the meeting, Kuroda said recent yen falls against the dollar are natural given the strength of the U.S. recovery, which allows the Federal Reserve to taper its massive asset purchases while the BOJ keeps policy ultra-loose.
“I don’t see any particular problem with gradual and natural exchange-rate fluctuations that reflect the real state of economic and financial conditions,” Kuroda said.
The dollar rose to a six-year high against the yen earlier this month on expectations that the Fed may raise U.S. interest rates faster than the market had priced in.
A weak yen is seen as a boon for Japanese exporters, including those based in Osaka such as electronics giant Panasonic Corp (6752.T), whose profits have climbed as their goods have become lower-priced and more attractive in overseas markets.
But total exports have failed to pick up despite the weak yen, disappointing policymakers who had hoped rising overseas shipments would support a fragile economic recovery and help offset the impact of a slump in domestic demand after a sales tax hike in April.
Some lawmakers and market analysts fret that further yen declines may do more harm than good by boosting the cost of fuel and raw material imports for Japanese firms.
Kuroda reiterated his optimistic view of the economy, saying it will continue to recover moderately as the pain from the April tax hike on consumption gradually subsides.
While acknowledging that external demand has been weak and some geo-political risks were of concern, he said robust household and corporate spending will underpin Japan’s recovery.
On monetary policy, Kuroda stressed the BOJ’s readiness to expand stimulus further “without hesitation” should risks threaten achievement of the bank’s price target.
“Japan’s economy has been on a path suggesting that the price stability target of 2 percent will be achieved as expected,” he said in the speech to Osaka business executives.
“We are only halfway there, however, and the Bank will continue with quantitative and qualitative easing (QQE), aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner,” he said.
The BOJ has stood pat on monetary policy since deploying an intense burst of stimulus in April last year, when it pledged to double base money via aggressive asset purchases to achieve its 2 percent inflation target in roughly two years.
Reporting by Leika Kihara; Editing by Chris Gallagher and Richard Borsuk