By Leika Kihara
TOKYO (Reuters) -Bank of Japan board member Asahi Noguchi said on Thursday the central bank must take a “measured, step-by-step approach” in raising interest rates.
If the pace of rate hikes is too fast, it could hurt companies’ wage-hike momentum and put the achievement of the central bank’s 2% inflation target further out of reach, Noguchi said.
But rate hikes that are too slow risk destabilising economic activity and prices, he added.
While the sole objective of monetary policy is to achieve price stability, exchange-rate and asset price moves are also important transmission channels, Noguchi said in a speech.
“In fact, if the yen depreciates, this exerts upward pressure on economic activity and prices through exports and imports,” he said.
“The BOJ must carefully examine how various economic channels ultimately affect economic activity, prices, and use the policy rate as a tool to adjust the degree of monetary accommodation as appropriate,” he said.
(Reporting by Leika Kihara; Editing by Christian Schmollinger)
