BOJ’s Ueda says central bank will guide policy with eye on rising inflation

Bank of Japan (BOJ) Governor Kazuo Ueda said on Thursday the central bank will guide monetary policy appropriately in line with recent rises in trend inflation.

Speaking in parliament, Ueda also said the central bank expects Japan’s economy to experience a positive cycle, in which higher job and wage growth leads to moderate rises in inflation.

Earlier a week ago, Bank of Japan Governor Kazuo Ueda said the central bank will examine whether to maintain its various monetary easing measures, including negative interest rates, when sustained achievement of its inflation target comes into sight.

“Based on our economic and price outlook as of now, Japan’s monetary conditions will likely remain accommodative even after ending negative rates,” Ueda told parliament.

The remarks came in the wake of data released on Thursday that showed Japan’s economy unexpectedly slipped into a recession in the final quarter of last year on weak consumption and capital expenditure.

With inflation exceeding the BOJ’s 2 percent target for well over a year, many market players expect the BOJ to end its negative interest rate policy in coming months.

Recent reassurances from BOJ officials that monetary policy will remain ultra-loose even after ending negative rates have helped accelerate renewed yen declines.

In a fresh warning against excessive yen declines, Finance Minister Shunichi Suzuki said that while a weak yen has merits and demerits, he was “more concerned” about the negative aspects of a weak currency.

“Currency rates are set by markets reflecting fundamentals. Rapid moves are undesirable and stable moves are desirable,” Suzuki told the same parliament session.

The yen weakened 0.10 percent to 150.08 per dollar in early Asian trade on Friday. The 150 mark puts the market on alert for possible intervention by Japan to slow the currency’s declines.