Kazuo Ueda, the Governor of the Bank of Japan, said today, Wednesday, that inflation may have become more susceptible to the effects of a weakened yen, and the bank will consider a monetary policy response if price expectations change.

Kyodo News reported that Ueda's remarks, which came a day after his meeting with Prime Minister Fumio Kishida, indicate increased caution regarding the sharp decline in the yen's value against the US dollar, which seemingly triggered a new round of market intervention by Japanese authorities last week.

Following his previous comments, which the markets interpreted as downplaying the impact of a weaker yen, the Japanese currency reached its lowest level in 34 years at 160 against the dollar on April 29.

The central bank governor continued in a parliamentary session, indicating signs that Japanese firms have become more active in determining wages and prices, thus we need to be aware of the fact or risk that prices may be more affected than before by fluctuations in foreign exchange rates.

He added that foreign exchange rates can significantly impact the economy and prices... depending on how things develop, a monetary policy response may become necessary.

He reiterated that the Bank of Japan's monetary policy does not aim to control foreign exchange rates, although his recent comments suggest that the central bank will not rule out raising interest rates... adding that the inflation trend, excluding temporary factors, is still just below the Bank of Japan's 2 percent target.

Kazuo Ueda concluded his policy guidance by saying, "We have been closely monitoring the recent decline of the yen," noting that he will try to accurately convey the opinions of the Bank of Japan to the financial markets.