TOKYO: Bank of Japan Governor Haruhiko Kuroda on Tuesday repeated his view that a weak yen benefited the economy if its moves were not too sharp, a comment that followed the currency’s fall to a fresh two-decade low.

The yen’s recent sharp declines are inflating already rising prices of imported fuel and food, hitting households and emerging as a politically hot issue ahead of an upper house election next month.

Kuroda echoed Finance Minister Shunichi Suzuki’s warning earlier on Tuesday that sharp currency moves were undesirable, and that exchange rate movements should be stable and reflect fundamentals.

“As long as the moves are not too sharp, a weak yen is beneficial for Japan’s economy,” Kuroda told parliament.

“But we must be mindful that the yen’s declines could have a negative impact on households and small service-sector firms in regional areas,” he said, adding that the effect of a weak yen varied between industries.

Markets have been selling the yen on expectations of widening interest-rate differentials between Japan and the United States, which is embarking on aggressive interest rate hikes.

The dollar rose to a fresh two-decade high of 132.75 yen on Tuesday as worries about persistent inflation pushed up US bond yields.

The Japanese currency has lost about 3% against the greenback so far this month. Kuroda reiterated that the BOJ would maintain ultra-low interest rates to support an economy still emerging from the coronavirus pandemic’s pain.

BOJ’s priority is to support economy with monetary easing

“Scaling back monetary stimulus too hastily could weigh on capital expenditure and domestic demand, and make achievement of our price target even more distant,” Kuroda said.

“By patiently maintaining our powerful monetary easing, we hope to support the economy so that prices rise in tandem with improvements in corporate profits, job growth and wages,” he said.