The head of the mission of the International Monetary Fund (IMF) in Japan, Ranil Salgado, has offered his opinion on the merits and demerits of the current depreciation of the yen.
Key comments
We believe that the recent yen depreciation reflects fundamentalssuch as expectations about the future monetary policies of the US and Japan
We see positive and negative effects in the depreciation of the yen for the Japanese economy.
yen weakness help exporters and to companies that make profits abroad, and facilitates the achievement of the 2% inflation target by the Bank of Japan.
The downside of yen weakness is the impact on importers and households.
Medium-term inflation will remain well below the BoJ target once the cost push factors fade.
It’s appropriate for the BoJ to keep monetary easing until inflation is achieved in a stable and lasting way.
If core consumer inflation rises to between 3% and 4%, we would support some form of monetary normalization by the BoJ, but we are still a long way from that.
Core inflation next year could be somewhat higher than we anticipated in April as some upside risks to inflation are emerging, such as those related to the yen’s decline.
Source: Fx Street
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