Bank of Japan Governor Haruhiko Kuroda has predicted that the rate hike will not be sustainable and sees downward pressure on the yen likely to ease due to higher interest rate differentials with the US.
According to the Financial Times, Kuroda argued that in a country used to low inflation and compared to other countries, Japan records inflation at 2.4%, but it is the highest since 2014.
These numbers allow the Bank of Japan to exercise flexible monetary policy, unlike the US Federal Reserve or the Bank of England, which has been forced to raise interest rates.
“At this time, the Bank of Japan should continue to support economic activity by continuing the current monetary easing,” Kuroda said in an interview with the British daily.
He also stated that “unless the Federal Reserve raises interest rates faster or higher than its future guidance shows, dollar parity will likely not be affected by interest rate differentials. The United States and Japan.”
Kuroda retracted his comment on Monday that consumers had become “tolerant” of rising inflation, sparking a backlash among citizens.
In a speech to the Japanese parliament, Kuroda stated that his expression that households were becoming more tolerant of rising prices was not entirely appropriate. So I will back down, he said.
The comment comes at a sensitive time for Prime Minister Fumio Kishida’s government, which is facing pressure to tackle rising food and fuel costs ahead of upper house elections next month.
The comments sparked outrage on social media and opposition from the government.
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