The chief of the Bank of Japan on Wednesday defended its policy of continuing with monetary easing as the yen briefly fell to a seven-and-a-half month low against the U.S. dollar in New York the same day.
"Although the headline rate of inflation is above 3 percent, which is well above the 2 percent inflation target, we think underlying inflation is still a bit lower than 2 percent," Kazuo Ueda, governor of the Japanese central bank, said at an event in Sintra, Portugal.
"That's why we are keeping our policy unchanged at the moment," he said during a session of the ECB Forum on Central Banking, also attended by U.S. Federal Reserve Chair Jerome Powell, European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey.
Ueda said the Japanese currency has been "influenced by many factors other than our monetary policy, including the policies of these three banks."
"We're less confident" about stable inflation in Japan in the coming years, Ueda said, but added that if the central bank becomes reasonably sure about it, "that could be a reason for a policy change."
The U.S., British and European central banks have raised key interest rates to fight stubborn price hikes in contrast with their Japanese counterpart, which has been pumping money into the market with ultralow rates.
In the morning in New York, the dollar briefly advanced to 144.62 yen, a level unseen since November last year, after Powell indicated during the event that the U.S. central bank could further tighten its monetary policy, prompting dollar-buying and yen-selling.
The dollar was quoted at 144.43-53 yen at 5 p.m. in New York, compared with 144.07-09 yen late Wednesday in Tokyo. The euro was traded at $1.0907-0917 and 157.63-73 yen at 5 p.m. in New York against $1.0952-0954 and 157.79-83 yen in Tokyo late in the day.
Japanese authorities have issued a series of verbal warnings in recent days as the yen meets selling pressure amid prospects that the interest rate gap between Japan and the United States will widen. Last year, Japan conducted multiple yen-buying, dollar-selling interventions to arrest the yen's decline.
"We'll monitor the situation very carefully," Ueda said during the event in Portugal. Regarding the looming prospect of Japan intervening in the financial market in the near future, he only noted that such moves are "the jurisdiction of the Ministry of Finance."
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