By Leika Kihara

TOKYO, Reuters – The recent declines in the yen have been driven by fundamentals. Japan should not change its economic policies, including ultra-low interest rates at the central bank, a top official of International Monetary Fund said.

With the currency falling to its lowest level in two decades against the dollar, the Bank of Japan (BOJ), continuing to defend their ultra-low-rate policy and increasing chances of aggressive U.S. Federal Reserve rate increases, has continued to support it.

Sanjaya Panth – deputy director at the IMF’s Asia and Pacific Department – said that what we have seen so far in the yen’s performance is due to fundamentals. She spoke out late Wednesday night to Reuters.

Fundamentals should be the focus of economic policymaking. Because of the current economic situation, we don’t think there’s any need to alter it.

Panth answered the question of whether Japanese authorities should intervene in the yen market to buy currency. He said that the situation was not chaotic and the current policy was acceptable.

A weak yen was once welcomed because it boosts exports. However, it has become a concern to Japanese policymakers since it increases the cost of fuel and food imports.

There is speculation in Japan that it may take action to stop further declines of the yen. This could include yen buying currency intervention, increasing interest rates and tweaking the BOJ’s dovish guidelines on the future direction of monetary policies.

Panth stated, “A weak yen isn’t bad for Japan,” Panth added. It does impact households. “It’s not a perfect mix,” he stated in an interview.

Panth stated that the BOJ’s ultra-loose policies were not necessary with inflation pressures remaining muted.

His statement said, “Japan’s situation is very different from other advanced countries that have started tightening their monetary policy.” “We don’t think there is any reason to modify the accommodative monetar policy.”

Expect the BOJ to increase this year’s inflation forecast, but keep its huge stimulus program at its next policy meeting which will be held April 27-28.