By Leika Kihara

TOKYO, Reuters – Japan’s Prime Minister Fumio Kishhida urged Tokyo’s central bank Tuesday to keep its monetary policy ultra loose. He brushed aside any suggestion of increasing interest rates to stop further falls in the yen.

The prospect of increasing U.S.-Japan rate differentials has pushed the Japanese yen to two-decade-lows against the dollar. This creates fear in lawmakers about the possibility that weak currencies could cause more damage than good for the economy, driving up import costs.

Some market participants speculate that the U.S. Federal Reserve is looking to increase interest rates aggressively. They may also pressure Bank of Japan (BOJ), to loosen its monetary policy in an effort to stop further drops in the yen.

Kishida stated that currency levels can be attributed to a variety of factors, including economic and monetary policy.

Kishida said that “The BOJ will continue its current policy to attain its 2% inflation target.”

When asked if the BOJ needed to adjust its loose policy in order to stop further falls of the yen, he replied that “the government hopes the central banks continues with their efforts to achieve this goal.”

Kishida, when asked about the recent weakness of the Japanese yen declined to provide specific numbers but spoke out about the dangers and rewards associated with sharp currency movements.

He stated that “as for weak yens, rapid currency moves were undesirable for many entities.”

Widely expected, the BOJ will maintain its ultra-low rate target at Thursday’s two-day policy conference.

BOJ Governor Haruhikokuroda stressed that the bank will keep its monetary policy loose to help an economy in recovery from the COVID-19 epidemic, despite inflation levels being much lower than those of most Western countries.