BoJ’s comments weight on yen
The yen trimmed gains, following the comments of BoJ’s official Kikuo Iwata, raising doubts over the central bank’s need to raise interest rates in order to bring down the policy divergence to normal levels.
“I absolutely do not think it’s time to begin stimulus cuts by raising rates”, said Kikuo Iwata, speaking on a business conference in the northern prefecture of Aomori.
“While inflation in the US is close to 2%, Japan still has a long way to go to reach the inflation target, which means that monetary stimulus is still necessary in Japan,” Mr. Iwata added.
Inflation in the country remains weak, despite several economic reports showing improvements across the economy, including retail sales and unemployment. Core consumer price index, the key gauge of inflation in Japan monitored by the central bank, edged up by 0.3% in April in annual terms.
The policy divergence, i.e. growing differential between interest rates, triggers capital outflows from countries with lower interest rates to countries with higher yields.
Such situation may put pressure on the Bank of Japan, forcing policy makers to increase open market operations and buy more securities, taking into account that BoJ adheres to the target yield of ten-year government securities at around zero.
Japanese yen traded nearly flat against the euro and the dollar, amid lower market volumes, due to an empty economic calendar.
“I absolutely do not think it’s time to begin stimulus cuts by raising rates”, said Kikuo Iwata, speaking on a business conference in the northern prefecture of Aomori.
“While inflation in the US is close to 2%, Japan still has a long way to go to reach the inflation target, which means that monetary stimulus is still necessary in Japan,” Mr. Iwata added.
Inflation in the country remains weak, despite several economic reports showing improvements across the economy, including retail sales and unemployment. Core consumer price index, the key gauge of inflation in Japan monitored by the central bank, edged up by 0.3% in April in annual terms.
The policy divergence, i.e. growing differential between interest rates, triggers capital outflows from countries with lower interest rates to countries with higher yields.
Such situation may put pressure on the Bank of Japan, forcing policy makers to increase open market operations and buy more securities, taking into account that BoJ adheres to the target yield of ten-year government securities at around zero.
Japanese yen traded nearly flat against the euro and the dollar, amid lower market volumes, due to an empty economic calendar.
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