Former BOJ Chief Kuroda urges Japan to address ‘misinterpretation’ of yen manipulation

By Leika Kihara

TOKYO (Reuters) – Japan must address any misunderstanding held by U.S. President Donald Trump that its central bank was intentionally weakening the yen with monetary policy, former Bank of Japan Governor Haruhiko Kuroda said.

Trump said on Monday he had informed Japan and China that they could not continue to devalue their currencies, as it would be unfair to the United States.

When asked about Trump’s statement on Friday night, Kuroda told a Japanese television interviewer that there were limits to what Japan could do to support the yen if the dollar were to rise due to higher U.S. inflation from Trump’s proposed tariffs.

“In reality, the Japanese government has been making significant efforts to prevent the yen from weakening,” Kuroda said, mentioning interventions in the exchange-rate market to bolster its currency.

After a period of very accommodative policy, the BOJ has started to increase interest rates, while the government intervened in the currency market in 2022 and last year to strengthen the yen, which hit a 38-year low near 162 to the dollar in July and closed this week around 148 yen.

“The BOJ is not deliberately pushing the yen lower with monetary policy. Any misunderstanding on that front should be clarified,” Kuroda stated.

While he has spoken at various seminars, this was Kuroda’s first television appearance since retiring as BOJ head.

BOJ TO CONTINUE NORMALISING RATES

The central bank is unwinding the aggressive monetary easing that Kuroda implemented during his tenure from 2013 to 2023 to combat Japan’s long-standing deflation and sluggish growth. He introduced a large asset-buying program in 2013, followed by negative interest rates and bond yield control in 2016.

Initial stimulus-induced yen depreciation and subsequent declines due to expectations of prolonged low rates drew criticism from Washington, including the first Trump administration, accusing Tokyo of trying to keep the yen weak to benefit Japanese exports.

Under current Governor Kazuo Ueda, the BOJ phased out the radical stimulus measures in March last year and raised short-term rates to 0.5% in January, believing that Japan was on the verge of sustainably achieving its 2% inflation target.

Kuroda stated that the BOJ was on the right path by gradually increasing rates, as maintaining very loose policy for an extended period could lead to higher inflation.

“The BOJ is already normalizing monetary policy and will continue to do so steadily, such as gradually raising rates towards levels considered neutral for the economy,” Kuroda explained.

“Raising rates quickly above neutral or keeping rates low for too long are both inappropriate,” he added.

In a research paper released in January, Kuroda indicated that the BOJ is likely to further raise rates in the coming years as inflation seems to be on track to consistently reach its 2% target.

(Reporting by Leika Kihara; Additional reporting by Takahiko Wada; Editing by William Mallard)