16 August 2001, 11:39  BoJ's Hayami hopes forex rates move in stable way, watching market closely

TOKYO (AFX-ASIA) - Bank of Japan governor Masaru Hayami said he hopes the foreign exchange market will move in a stable fashion, adding that the bank will monitor closely any disruptive movement after its decision earlier this week to ease monetary policy. "I'm a little bit anxious about movements in the equity and forex markets (following Tuesday's decision) though I'm not going to comment specifically on movements of these markets," Hayami said. "Therefore, we will watch closely developments in various markets." Hayami stressed that it is "desirable that the forex market moves in a stable way based on fundamentals." He said it is premature to say if markets are reacting appropriately to the decision to ease policy, adding that he does not think the yen is strong but that its gains are "a reflection of depreciation of the dollar." Hayami said he will watch closely how the US Fed manages its policy in light of the fact that US inflation is high and the current account deficit large. "Given the situation, the US must be thinking of financing the current account deficit by increasing exports," he said. Hayami also said he sees "no need" to buy foreign currency to achieve the bank's newly set policy goals, adding: "Neither do I think such an option will be necessary in the future." The slump in Asian countries' economies will not encourage the BoJ to take such action, he said. "It seems that many countries want to boost their exports to rebuild their economies and it seems that they are worried about levels of the dollar/yen in particular," he said. Hayami said he hopes yields of long-term government bonds will move in a stable way "at around present levels." He also pledged to continue to manage monetary policy flexibly, adding: "I think the BoJ has been the most bold central bank in the world" citing its unprecedented monetary policy adopted over the past few years. "However, I have to admit that the economy hasn't improved yet," he added.

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