TOKYO Bank of Japan (BOJ) governor Kazuo Ueda said on Wednesday the central bank would not directly respond to currency moves in setting monetary policy, brushing aside market speculation that the yen's sharp falls could force it to raise interest rates.

"We absolutely won't change monetary policy directly in response to exchange-rate moves," Ueda told Parliament, when asked by an opposition lawmaker on whether yen moves would have any impact on the BOJ's decision on the next rate hike timing.

The weak yen may push up import prices but that alone won't trigger a rate hike either, Ueda said, stressing that the key is whether such upward price pressure would affect broader inflation and wage growth.

"If there's a risk that wages and inflation could rise more than expected, and push up trend inflation above 2%, we may need to consider changing monetary policy," he said.

The yen fell to a 34-year low of 151.975 versus the dollar last month.

The decline has come despite the BOJ's historic policy shift that ended eight years of negative interest rates, as markets interpreted its dovish guidance as a sign further rate hikes will be some time away.

Some market players believe the weak yen could be among triggers for the BOJ's next rate hike, which is seen by many economists as coming later this year.

Ueda said the BOJ's decision to exit ultra-loose policy in March was based on its view that sustained achievement of its 2% inflation target has come into sight.

The central bank will consider raising rates again if trend inflation, which is still below 2%, accelerates towards that level as it projects, Ueda said.

"If trend inflation moves in line with our forecast, it could be appropriate to adjust the degree of monetary stimulus though we don't know when that will happen," he said.

Ueda says trend inflation is defined as price moves stripping away the effect of one-off factors like fuel costs, and measured by looking at various indicators on how the strength in the economy and domestic demand affects prices.

  - Reuters