A weak yen is beneficial for Japan’s economy as the boost to exports exceeds the increase in the cost of imports, a senior International Monetary Fund (IMF) official said on Friday.
Nada Choueiri, the IMF’s Japan mission chief, also urged Japan to raise interest rates at a gradual pace and compile supplementary budgets only when a big
shock hits the economy.
“We would advise the Bank of Japan to remain cautious, as they have been so far, and to be gradual” in the pace of rate hikes, since there was high uncertainty over the inflation outlook, she said in an interview.
The yen has resumed its declines recently against the dollar on expectations that the U.S.-Japan interest rate divergence will remain wide, posing a headache for authorities who fret of the hit to households from rising import costs from a weak yen.
But Choueiri said the benefit from rising exports from a weak yen exceeded the rising costs in imports for Japan, which is “a very outward-oriented” economy. “So, the yen depreciation on net benefits growth in Japan,” she said.
The yen’s falls triggered warnings from Japanese Finance Minister Katsunobu Kato, who said on Wednesday the yen’s recent “one-sided, rapid” moves warranted “heightened
vigilance.”
“It’s important to recognize that the Japanese authorities are committed to a flexible exchange rate regime,” she said, when asked whether rapid yen moves would justify Tokyo intervening in the currency market.
The Bank of Japan is widely expected at a two-day policy meeting next week to keep its short-term policy rate steady at 0.25%. Most economists polled by Reuters expect it to hike rates again by March next year.
In its World Economic Outlook issued this month, the IMF projected Japan’s economic growth to accelerate to 1.1% in 2025 from 0.3% this year as rising real wages boost consumption.
Source : Reuters
