The government will warn of the pain a weak yen may inflict on households in this year's long-term economic policy road map, a draft showed Tuesday, as policymakers grow increasingly concerned about the currency's declines.
The reference to the weak yen's impact will likely keep the Bank of Japan under pressure to raise interest rates or slow its huge bond buying — moves some markets believe could slow the currency's declines.
"Japan's economy continues to recover moderately, though some sectors, notably consumption, are stalling," the draft of this year's long-term road map said. "At present, the pace of wage rises hasn't caught up with that of inflation," it added.
"Vigilance is required to the impact a weak yen could have on households' purchasing power through rising import prices," according to the draft.
On monetary policy, the road map called on the BOJ to "sustainably and stably achieve its 2% inflation target while confirming whether a positive wage-inflation cycle is in place," the draft showed.
The language is roughly unchanged from the previous year's road map, which called on the BOJ to sustainably and stably achieve its 2% inflation target accompanied by wage increases.
The long-term roadmap, which is crafted each year as a key document highlighting the administration's policy priorities, is expected to be finalized around June 21.
A weak yen has become a headache for Prime Minister Fumio Kishida's administration, which has seen approval ratings slump as the currency's decline pushes up households' cost of living by inflating the prices of imported food and fuel.
Authorities spent ¥9.79 trillion intervening in the foreign exchange market to support the yen over the past month, in moves that kept the currency from testing new lows but failing to reverse its downtrend.
BOJ Gov. Kazuo Ueda has ruled out using monetary policy to directly influence exchange-rate moves, but has signaled the chance of raising rates if the weak yen pushes up inflation more than expected.
Many market participants expect the BOJ to raise interest rates from current near-zero levels this year, with some expecting such action to happen as early as July.
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