BoJs policy to support the yen could be an option to curb inflation, according to a Japanese minister

Monetary policy of the Bank of Japan could be a lever to contain rising prices by strengthening the yen, said Japanese Trade Minister on Sunday, as the central bank considers raising interest rates this month to counter inflation fueled by the Iranian conflict.

Ryosei Akazawa, Japan’s chief trade negotiator and head of the Ministry of Economy, Trade, and Industry, responded to an economist’s suggestion during a televised debate that a stronger yen would help offset rising import costs of crude oil.

Hideo Kumano, chief economist at Dai-ichi Life Research Institute, stated on public broadcaster NHK that if BoJ’s policy were used to appreciate the yen by about 10% to 15%, it could curb price rises across the economy, including for food products, which represent a significant portion of household expenses.

“While monitoring the impact on the economy, I think considering measures in line with what Mr. Kumano just mentioned could be possible as an option,” said Akazawa, adding that BoJ’s 2% inflation target was “very close” to being achieved while real interest rates remained “very low.”

Financial markets currently price in a probability of around 60% for BoJ to raise interest rates on April 28.

BoJ Deputy Governor Ryozo Himino said on Friday that the central bank would guide its monetary policy by keeping an eye on the scale and duration of the economic shock caused by the war in the Middle East, emphasizing the need to remain vigilant against the risk of stagflation.