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The
central bank's increasingly isolated dovish stance helped push
the yen below 120 to the dollar on Tuesday for the first time
since 2016, drawing a warning from the finance minister against
rapid exchange-rate moves.
Kuroda said consumer inflation was expected to accelerate as
some firms pass on rising energy and food costs to households.
"Instead of leading to higher wages and corporate profits, such
cost-push inflation will weigh on the economy in the long run by
hurting corporate profits and households' real income," Kuroda
told parliament.
While nominal wages may increase "quite significantly", the rise
in consumer inflation may sap households' purchasing power by
pushing down price-adjusted real wages, he added.
"Given recent price developments, we need to patiently maintain
our powerful monetary easing," Kuroda said.
Kuroda's remarks came in the wake of those by Fed Chair Jerome
Powell, who pledged on Monday to move "expeditiously" to raise
rates to keep an upward price spiral from getting entrenched.
A weak yen has become a politically sensitive topic for Japan as
it pushes up already rising import costs for energy and raw
materials, adding pain to an economy only just emerging from the
coronavirus pandemic's wounds.
Finance Minister Shunichi Suzuki warned that while a weak yen
helped boost exporters' profits, it added a burden to importers
and households.
"A weak yen has both positive and negative effects on the
economy," Suzuki told reporters.
"It's undesirable for currencies to swing sharply ... The
government is closely watching how currency moves may affect the
economy," he added.
As part of efforts to fire up inflation to its elusive 2%
target, the BOJ caps long-term borrowing costs at around zero.
While it has slowed purchases of government bonds and
exchange-traded funds (ETF) in recent years, it continues to
hold huge amounts of assets on its balance sheet.
In the event the BOJ decides to reduce its ETF holdings, it will
do so in a way that minimises the central bank's losses and any
disruption to financial markets, Kuroda said on Tuesday.
But it was premature now to debate an exit from easy policy,
including how the BOJ could reduce its ETF holdings, with
inflation yet to sustainably hit 2%, he said.
(Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by
Shri Navaratnam, Robert Birsel)
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