By Leika Kihara

TOKYO, Reuters – Japan’s Prime Minister Fumio Kishhida stated that the central bank’s monetary policies are aimed at achieving the 2% inflation target and not manipulating currency rates. He dismissed the notion that the country should end its ultra-low interest-rate policy in order to stop sharp yen falls.

Kishida stated that domestic inflation rose mainly due to an increase in global raw material and labor costs rather than the weakening yen.

When asked by an opposition lawmaker, Kishida stated that the Bank of Japan (BOJ), is conducting monetary policies to reach its 2% inflation target. He also said that he was not manipulating currency rates.

On Friday, he stated, “The government wishes the BOJ continued to strive towards achieving it inflation target, with an eyes on economic, financial and price developments.”

On Friday, the yen fell to a new 20-year low at 126.56 against a dollar as investors concentrated on the gap between aggressive rate rise plans by the U.S. Federal Reserve and BOJ’s promise to keep its ultra-low policy.

Although a weak yen may boost Japanese exports, it can also increase import costs for energy or food products. This is because of the fact that prices have risen due to war in Ukraine.

Some lawmakers blame the BOJ’s easy policy on accelerating yen drops and adding to pain for households and firms through pushing up living expenses.

The BOJ has a policy called yield curve control and pledges that it will keep short-term interest rates below 0.1%, while keeping long-term borrowing costs under 0%. This is to increase inflation up to its target of 2%.