Bank of Japan concerned about strengthening yen

Bank of Japan Deputy Governor Hirohide Yamaguchi announced on Tuesday that he would make it his priority to address the negative impact that the rise in value of the yen could have on the Japanese economy.

These comments may indicate that the BoJ will take further steps to alter its monetary policy if the  yen’s rise in value becomes a threat to the economic recovery of the island nation, which has been gradually recovering from the devastation wreaked by the March 11th earthquake.

Warnings regarding the yen’s strength have intensified since the US dollar hit a four month low of 78.45 yen last week.

The dollar was slightly decreasing in value vis-a-vis the yen today, trading at 79.00 as of around 12:50 P.M., GMT. Click Here for more analysis about USD/JPY.

“The rising yen has advantages such as reducing the cost of imports. But, the Japanese economy is just beginning to recover from the slowdown caused by the earthquake and we need to closely monitor any adverse impact such as a drop in exports, business income or entrepreneurial sentiment,” said Hirohide Yamaguchi in comments to a parliamentary committee. “We will take appropriate action when necessary,” he added.

Yamaguchi’s words struck a more cautionary tone than those by by Bank of Japan Governor Masaaki Shirakawa, who was recently quoted as saying that a stronger yen could create economic pressure on Japan in the short term.

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