Bank of Japan says it will stick with ultra-loose policies

TOKYO

The Bank of Japan's (BoJ) deputy governor said on Wednesday that officials would stick to their ultra-loose monetary policies given market volatility, sparking a big drop in the yen, while stocks rose.

Investors were jittery after the Nikkei surged more than 10 percent on Aug. 6, a day after tanking more than 12 percent on concerns about a possible U.S. recession and the stronger yen.

Major shares reversed earlier losses to mark gains. Toyota rose 1.07 percent, semiconductor test-maker Advantest rose 1.09 percent and Nintendo added 2.02 percent.

The yen has appreciated sharply since Japan's Central Bank last week hiked interest rates for only the second time in 17 years, indicating plans for more if the economy performs as officials expect.

But in a speech yesterday morning, BoJ deputy governor Shinichi Uchida took a more dovish stance.

"I believe that the bank needs to maintain monetary easing with the current policy interest rate for the time being, with developments in financial and capital markets at home and abroad being extremely volatile," he said.

Uchida said that in recent days, "the yen has appreciated significantly against the U.S. dollar, since large positions that had been built up on a weaker yen are being unwound."

"Moreover, partly due to the correction of the yen's depreciation, stock prices in Japan have declined to a greater extent than other economies," he added.

After his speech, one dollar bought 146.69 yen, compared with 144.68 in New York.

"The market will likely remain nervous about the direction of the dollar-yen," brokerage house Monex said.