MNI BRIEF: Yen Not Affecting Underlying Inflation - BOJ's Ueda

Bank of Japan Governor Kazuo Ueda said on Friday the yen's recent weakness has not affected underling inflation, which the Bank continued to watch closely.

“The BOJ isn’t targeting foreign exchange rates but we are closely watching developments of forex rates and their impact on economic activity and prices,” Ueda told reporters. Should the underlying trend change as a result of the weak yen, the BOJ will change monetary policy, he added without elaborating on timing.

While Ueda ruled out an imminent sharp rise in inflation caused by the weak yen, he voiced concern over the risk of a sharp increase in prices.

He also said the BOJ will lower the scale of its purchases of JGBs in the future but did not provide details. “We have no plan to actively reduce the scale of bond buying as a policy tool as the bank adjusts the degree of easy policy through the unsecured overnight call loan rate as a policy tool,” he added.

The BOJ will continue to buy JGBs worth about JPY6 trillion, the board revealed today, noting it tolerates a flexible approach to the scale of the operations due to bond supply-demand conditions and bid-to-cover ratios.

MNI reported this week the BOJ will aim to lower its bond buying programme to JPY5 trillion over the next few months. (See MNI POLICY: BOJ Aims To Cut JGB Bond Buying Level In July)