Bank of Japan Governor Haruhiko Kuroda said Wednesday that monetary easing "certainly" must be maintained to achieve its 2 percent inflation target stably and sustainably.
Speaking at an event, Kuroda said Japan's inflation rate has been rising, driven largely by higher import costs. However, such inflation will not continue, Kuroda said, adding that robust wage growth is needed.
Kuroda said the BOJ is closely watching the impact of foreign exchange movements on the economy, noting that "rapid, unidirectional" fluctuations are bad for the economy.
"We have not yet achieved the 2 percent price stability target in a stable and sustainable manner. So certainly we will have to continue our monetary easing until we achieve the 2 percent target in a sustainable and stable manner," Kuroda told the event, hosted by the Institute of International Finance.
The BOJ's dovish policy stance contrasts sharply with its U.S. and European peers, which have been raising rates to rein in soaring inflation. The prospect of aggressive rate hikes, however, has raised recession fears.
The governor said monetary easing is needed to support the Japanese economy, recovering from the fallout of the COVID-19 pandemic. The situation in Japan is different from those in Europe or the United States, where the pace of rising prices has been relatively slower. The inflation rate will stably increase toward 2 percent in the coming years, though caution is warranted, he said.
"You cannot simply jump to the conclusion that we will be able to achieve 2 percent inflation in two years' time or one-year time so that we can change monetary policy now. That is not correct," Kuroda said.
His remarks came after Japan intervened in the foreign exchange market last month when the yen slipped to 145.90. On Wednesday, the dollar continued its advance, trading close to 147.
Caution about another round of intervention has persisted in the market after the previous one, which Kuroda described as "quite appropriate."
Finance chiefs from the Group of 20 economies are gathering in Washington to discuss the global economy's challenges as Russia's war against Ukraine drags on, and the dollar has been broadly gaining strength.
"Probably, in Washington D.C. this time, a lot of emerging economies will complain about the almost universal dollar appreciation against almost all currencies, in particular emerging currencies," Kuroda said.
"And that may have made them address or adopt somewhat higher monetary policy rates than they think quite appropriate from a domestic economic point of view," he added.
A strong dollar can help the United States curb inflation but raises concern about capital outflows from emerging economies.