BOJ won’t raise rates when markets unstable, deputy governor says

By Leika Kihara

HAKODATE, Japan (Reuters) -Bank of Japan (BOJ) Deputy Governor Shinichi Uchida said on Wednesday the central bank won’t raise interest rates when financial markets are unstable.

The recent strengthening of the yen would affect the BOJ’s policy decision because it reduces upward pressure on import prices, and therefore overall inflation, Uchida said.

Stock market volatility would also influence the central bank’s decision by affecting corporate activity and consumption, he said.

“As we’re seeing sharp volatility in domestic and overseas financial markets, it’s necessary to maintain current levels of monetary easing for the time being,” Uchida said in a speech to business leaders in the northern Japan city of Hakodate.

The BOJ’s interest rate path will “obviously” change if market volatility affects its economic and price outlook, its view on risks, and the likelihood of durably achieving its 2% inflation target, he said.

“We won’t raise interest rates when financial markets are unstable,” Uchida said.