Bank of Japan Board Members Divided Over Monetary Policy Stance as Yen Plummets

As the Japanese yen continues to fall, a Bank of Japan (BoJ) policymaker recently asserted that it was wrong to change its monetary policy in favor of the exchange rate of the single currency. This statement was revealed by a summary of opinions from the April meeting, which snuffed hopes of a rate hike intervention from the BoJ to counter sharp yen declines.

The JPY recently slumped to its lowest point against the US dollar, which has pumped the cost of raw material imports globally. This development has sparked concern among Japanese policymakers regarding the potential effect on Japan’s already weak economic recovery.

That said, some top spectators believe that the BoJ could adjust its ultra-dovish monetary policy to slow the yen’s descent, which is sponsored by the widening interest rate differentials between the BoJ and its American counterpart.

Bank of Japan Board Debate It Out

In the recently released summary, one of the nine board members of the Bank of Japan was quoted saying: “Among the factors behind the weak yen is the widening gap in economic conditions between Japan and Western countries. It’s inappropriate to change monetary policy for the purpose of controlling exchange rates.”

Another opinion in the statement suggested: “In guiding monetary policy, the BOJ must look at the impact of fluctuations in commodity prices and exchange rates on the economy and prices rather than the price moves.”

However, several other board members emphasized the importance of maintaining the bank’s stimulus program, arguing that an uptick in inflation will likely be temporary and will come from the rising costs of raw materials. Another board member argued: “The BOJ must be mindful of the need to make its ultra-loose monetary policy sustainable if inflation remains short of its 2% target for a prolonged period.”