MNI BRIEF: BOJ: 10% Yen Fall Has Positive Impact On Real GDP

A 10% yen depreciation in the real effective exchange rate has proven to bring a positive impact on real GDP in recent years, according to the full-text of the Bank of Japan's January Outlook Report released on Wednesday.

The outlook did not specify a band of yen trade in the assessment, but suggested that in market-based moves, a weaker currency has benefitted the economy.

“Even when taking into account economic structural changes in recent years, the yen's depreciation is likely to continue to have a positive impact on Japan's economy on the whole," the outlook said.

The BOJ on Tuesday brushed aside talk that it would change its easy policy stance in the wake of a weaker yen and rising bond yields, see: MNI STATE OF PLAY: BOJ Kuroda Rules Out Early Tightening. And Governor Haruhiko Kuroda explicitly said the current yen level was still a positive for the economy, see: MNI INSIGHT: BOJ Unruffled On Yen, Eyes Govt Reax If 120 Hit.

The outlook suggested instead that the extent of volatility in the exchange is the key factor. “Regardless of whether the yen depreciates or appreciates, if the exchange rates change rapidly at a pace that economic entities cannot keep up with, this may have an adverse impact on the economy.”