Japan Economy Minister Kiuchi: Pass-through of rising costs has been limited so far

Sagar Dua FXStreet

Japan Economy Minister Minoru Kiuchi said during the European trading session on Tuesday that the overall impact of the increase in the cost of goods has not yet been passed. Kiuchi added that both the government and the Bank of Japan (BoJ) are closely working to achieve a sustainable 2% inflation target.

Remarks

June overall CPI shows price rises remain moderate year-on-year.

Must be vigilant to likelihood pass-through of costs on food could proceed from summer through autumn.

Govt shares with BoJ forecast that consumer inflation will accelerate in latter half of this year, slow thereafter

Hope BoJ conducts monetary policy appropriately to stably, sustainably achieve its 2% inflation target.

Hope BoJ closely communicates with govt in guiding policy.

Won't comment on specific FX level but watching closely impact of FX moves on economy, prices.

Market reaction

No immediate reaction is seen in the Japanese Yen following remarks from Japan Economy Minister Kiuchi. At press time, USD/JPY trades near its intraday high at around 157.65.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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