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Bank of Japan governors agrees to monitor the development of the yen

Minutes from Wednesday’s BOJ meeting show that Bank of Japan (BOJ) board members agreed that the central bank needs to examine whether recent sharp fluctuations in the yen’s exchange rate could affect interest rate policy.

One member said downward pressure on the yen may ease as the global economic slowdown affects global long-term inflation and interest rates.

At its July 20-21 meetings, the BOJ expects inflation to exceed its 2% target this year based on new forecasts. However, it is maintaining an ultra-low interest rate and signaling its intention to keep policy very loose.

Analysts blame the very low interest rates for the accelerated decline of the Japanese currency.

Surprisingly, last week the government intervened in the foreign exchange markets to halt the yen’s depreciation, selling the dollar and buying the yen for the first time since 1998.

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