Bank of Japan Governor Masaaki Shirakawa said yesterday the central bank was closely watching the effect on the economy of the yen’s appreciation, and is prepared to take “appropriate action” if needed.
“We are ready to implement appropriate action in a timely manner if judged necessary,” Shirakawa said at a forum hosted by the Japan Society of Monetary Economics in Kobe.
Shirakawa spoke publicly two days after the yen weakened amid speculation Japan had sold its currency for a second time after ending a six-year period of refraining from intervention. Bank policy makers repeated this month that the bank will take more policy actions if needed, indicating their willingness to provide additional monetary stimulus.
“We are watching how the yen’s current gain affects the Japanese economy,” Shirakawa said. “We have to pay more attention than before to downside risk to the economy.”
Shirakawa declined to comment on specific yen levels, adding that exchange rates move “for various reasons.”
The yen tumbled 1 percent in about 10 minutes on Friday, reaching a low of ¥85.40 per US dollar. The decline was the biggest since Sept. 15, when Japan stepped back into markets after the currency surged to the highest level since 1995. The yen strengthened 1.9 percent last week to ¥84.26 per US dollar.
Shirakawa also said that “monetizing debt” risks raising bond yields.
The bank has a self-imposed cap on government bond buying to avoid such purchases from being regarded as monetizing public debt. The bank stipulates that purchases cannot exceed the amount of banknotes in circulation.
“If government bond purchases by a central bank is regarded as a tool to pay for fiscal expenditure or an act of debt monetization, that would spur inflation expectations and increase government bond yields,” Shirakawa said.
Shirakawa comments came as the central bank faces mounting pressure to increase monthly purchases of government bonds, and as politicians flag the possibility of amending the Bank of Japan Law, which guarantees the central bank’s independence from the government.
Analysts at Standard and Poor’s and Moody’s Investors Service this month said the bank could buy more government bonds and expand its balance sheet, while Ichiro Ozawa, former No. 2 in the ruling Democratic Party of Japan, said on Sept. 14 the bank law may need changing so that the central bank and the government can work closer to beat deflation.
Shirakawa defended the bank’s current policy framework, describing it as “flexible” and “advanced.”
“Central banks which don’t adopt inflation targeting, like the [Bank of Japan] and the [US] Fed, have published favorable price levels over the long-term,” he said.
Bank board members say they consider consumer prices to be stable in a positive range of up to 2 percent, with the median level of 1 percent.
The governor also defended the Bank of Japan Law, which stipulates the purpose of monetary policy is to achieve stable prices and sound economic growth.
“The current law makes it possible to pursue sustainable price stability over the medium and long-term” while avoiding big swings in economic growth, he said.
Shirakawa also said long-term sustainability of the government’s fiscal balance was a “crucial factor” in maintaining currency and finance stability.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS