BOJ's Kuroda Vows Easy Policy, Warns Of Import Costs

Bank of Japan Governor Haruhiko Kuroda on Wednesday warned the recent rise in inflation driven by higher import costs could hurt the country’s economy as the central bank attempts to keep monetary policy ultra-loose.

Consumer inflation is likely to accelerate as energy prices rise sharply and companies pass on higher raw material costs to households, Kuroda said.

The BOJ chief expects the world's third-largest economy to recover as consumption improves and robust overseas demand underpins Japanese exports, but he also warned of risks.

"The outlook… remains highly uncertain due to the impact of the pandemic, as well as developments regarding Ukraine and the impact on commodity prices," Kuroda said in a speech to an annual meeting of trust banks.

He stressed the need to maintain the BOJ's massive stimulus to support an economy that has yet to recover to pre-pandemic levels.

"Recent rising inflation, driven by higher import costs, weighs on Japan's economy by reducing households' real income and corporate profits," Kuroda said.

A spike in global commodity prices, fuelled by events in Ukraine, and a weak yen have inflated the cost of imports for resource-poor Japan, threatening to derail a fragile economic recovery.

Finance Minister Shinichi Suzuki cautioned markets against pushing down the yen too much, saying earlier on Wednesday that rapid moves in the yen were "undesirable."

The remark, however, failed to prevent the yen from sliding below 126 to the dollar on Wednesday, the first time it had breached that level since May 2002. (Reuters)