By Leika Kihara

TOKYO, Reuters – A Bank of Japan policymaker stated that it is inappropriate to alter monetary policy in order to control exchange rates. This was a summary of the opinions from the April meeting. It also dismissed the possibility of countering sharp yen drops with interest rate increases.

In order to raise the price of raw materials, the yen has fallen to its 20-year lowest against the dollar. This is causing concern in policymakers about the possible impact on Japan’s fragile economic recovery.

Some market participants believe that the BOJ could adjust its extremely loose policy to slow the decline of the yen. This is due in part to rising interest rates differentials, as the U.S. Federal Reserve begins aggressive rate hikes.

The widening economic gap between Japan and Western nations is one of the reasons for the weakening yen. In the Thursday summary, which was released by the BOJ on Thursday, one member of its nine-member board stated it is inappropriate to adjust monetary policy with the aim of controlling exchange rate.

Another opinion stated that the BOJ should consider the effects of fluctuating commodity prices on the economy and the prices themselves when guiding its monetary policy.

A number of board members highlighted the importance to keep the BOJ’s huge stimulus programme, in the belief that an increase in inflation would likely only be temporary. They also believed rising raw material prices will drive any spike in inflation.

One member said that the BOJ should be aware of the necessity to sustain its loose monetary policy if inflation is not at its target of 2% for a long time.

The BOJ renewed its resolve to maintain ultra-low interest rates at its April 27-28 meeting by vowing that it would buy unlimited bonds each day to protect its yield target. This triggered a new sell-off of the yen.