BOJ deputy governor plays down chance of near-term rate hike, yen slumps
HAKODATE, Japan -The Bank of Japan's influential deputy governor said on Wednesday the central bank won't hike interest rates when markets are unstable, playing down the chance of a near-term hike in borrowing costs.
The recent strengthening of the yen would affect the BOJ's policy decision-making because it reduces upward pressure on import prices, and therefore overall inflation, Uchida said. "The BOJ hiked interest rates because it didn't like the weak yen. Now, it appears to be suggesting a pause in rate hikes because it doesn't like stocks falling," said Takuya Kanda, an analyst at Gaitame.com Research Institute.
The hawkish remarks, as well as weak U.S. labour data that stoked fears of recession in the world's largest economy, helped contribute to a global market rout that sent the yen soaring and Japan's Nikkei average plunging on Monday. "Uchida's comments are clearly dovish. Unless market sentiment recovers rapidly, the chance of the BOJ hiking rates either in September or October is low," said Toru Suehiro, an economist at Daiwa Securities.
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