Deputy governor of the Bank of Japan himino said on Tuesday that the Bank of Japan should not automatically react to foreign exchange movements in determining the level of interest rates, and that it should instead consider various factors.
However, he acknowledged that the central bank must remain extremely vigilant regarding foreign exchange market developments and their impact on the Japanese economy and prices.
Himino added that it is very difficult to determine where the final interest rate will be in Japan, partly due to the fact that short-term interest rates have not moved much for a very long time.
He also said that the Bank of Japan should avoid causing disruptions and sudden moves in the bond market and move towards conditions where market participants do not need to worry too much about our presence in the market.
It is also reported that the Bank of Japan is considering reducing bond purchases, and policymakers are watching the markets before making their decision. In any case, this has always been the step before they raise interest rates, if they do, it could be next July.
