By Megumi Fujikawa
The Bank of Japan will need to proceed carefully with any further policy changes, policy board member Seiji Adachi said, stressing that the central bank's decision to end easing measures wasn't a shift toward monetary tightening.
"We need to absolutely avoid premature rate increases, which could throw cold water on a chance for the Japanese economy to recover," Adachi said in a speech on Wednesday.
The likelihood of achieving sustainable and stable 2% inflation is increasing, but it isn't still completely certain, Adachi said, adding that the central bank needs to maintain accommodative monetary conditions.
In March, the BOJ decided to raise interest rates for the first time since 2007, saying a positive cycle of wages and prices are finally starting to work. Adachi said Wednesday the decision didn't mean that the central bank was shifting its stance to a tightening mode.
Adachi's comments come as expectations for further policy changes by the BOJ pushed up the yield on benchmark 10-year Japanese government bonds to 1.065%, the highest level since December 2011.
The view for early monetary tightening in Japan has been growing as the yen's continued weakness raises fears over long-lasting inflation. According to the latest government data, overall consumer prices rose 2.5% from a year earlier in April, staying above the central bank's 2% target for two years.
Although the BOJ isn't directly in charge of foreign exchange rates, Adachi said the central bank could consider monetary policy responses if a weak yen poses a threat to the goal of maintaining price stability.
The yen is trading around 157.25 against the dollar in Tokyo on Wednesday.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
05-28-24 2306ET
