By Leika Kihara

TOKYO, Reuters – The recent “significant” depreciation of the yen reflects fundamentals such as market expectations regarding different monetary policy pathways between Japan and America, a Senior International Monetary Fund official stated on Thursday.

Ranil Salgado (IMF’s Japan Mission Chief) stated that the recent movements of the yen against the dollar were strongly related to differences in interest rates between Japan and the U.S.

He said that rising global raw materials prices have also affected the yen. Japan is a large commodity importer and must therefore pay more dollars.

Salgado said that fundamentals are what the yen moves. We see positive and negative consequences in the yen’s depreciation.”

Salgado stated that a weak yen could help exporters, and allow the Bank of Japan to achieve a target of 2% inflation by driving up import prices.

He said that the depreciation of the yen would be a problem for both households and importers, as it will increase the living costs.

On Thursday, the Japanese yen plunged to an all-time low of 134.56 dollars per dollar. It was weighed down in part by higher interest rates elsewhere. At a time when Bank of Japan continues to maintain a high level of stimulus policy, it is still committed to keeping it at that level.