A weak yen may be hurting Japanese households more than in the past, as the country’s increasing reliance on more expensive raw material imports pushes up the cost of living, Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Thursday.

Kuroda’s remarks are the most direct acknowledgement to date of the potential disadvantages of a weak currency, highlighting a growing concern among policymakers of the hit to Japan’s fragile recovery from a steady rise in input costs.

“The yen’s depreciation might have an increasing negative impact on household income through price rises,” Kuroda told a gathering of business leaders at a conference in Tokyo.

He repeated his view that overall, the benefits of a weak yen outweigh the drawbacks - yen declines make Japanese goods more competitive overseas, and boost yen-based profits that companies earn overseas.

Still, he said, a weak yen can hurt households and domestic retailers by pushing up import costs, a trend that may be intensifying due to Japan’s increasing reliance on imports.

“A quantitative analysis by the bank’s staff shows that the effects of the yen’s depreciation in terms of pushing up prices of durable goods have increased in recent years,” Kuroda said.

Japanese policymakers have traditionally favoured a weak yen over a strong one, and until 2011 had intervened in the market to stop a strong yen from hurting the export-reliant economy.

Kuroda, himself a former top currency diplomat, had up till now focused on stressing the benefits of a weak yen, countering critics who saw recent yen falls as adding pain to an economy already hit by rising fuel and commodity prices.

While a weak yen inflates the value of profits Japanese firms earn overseas, the boost it gives to exports has fallen as more companies shift production overseas, Kuroda said, pointing to structural changes in the way yen moves affect the economy.

“The yen’s depreciation basically has a net positive impact on Japan’s economy,” Kuroda said. “That said, the yen’s fall has positive and negative effects, and due attention should be paid to the fact its effects will materialise in various ways.”

Kuroda also stressed the BOJ’s readiness to maintain an ultra-loose policy to lift consumer prices toward its 2% target.

While rising global fuel and raw material costs pushed wholesale inflation to a record annual 9% in November, consumer inflation is stuck around zero as weak consumption keeps firms from raising prices of their goods.

Growing doubts over the benefits of a weak yen, however, may complicate the BOJ’s communication. Keeping ultra-low interest rates - when other major central banks eye rate hikes - may push down the yen further against other currencies, analysts say.

The Bank of Japan offered on Thursday to extend $18 billion worth of loans to financial institutions in a first auction conducted for a new scheme aimed at promoting activities to fight climate change.

The combined 2.05 trillion yen ($17.94 billion) in loans will be disbursed on Friday and mature in January 2023, the central bank said in a statement.

The BOJ launched a new lending scheme this year under which it offers zero-interest loans that can be rolled over until 2030 to banks that boost green and sustainable loans.

The green plans come as other major central banks use their institutional heft to take on climate change. The BOJ said in November that 43 financial institutions, including three megabanks, qualified to tap the scheme.

Japan’s crude steel output is expected to rise 1.9% in the January-March quarter from a year earlier, helped by a recovery in manufacturing including shipbuilding and machinery, its Ministry of Economy, Trade and Industry (METI) said on Thursday.

This would mark the fourth straight quarterly increase and bring annual output for the financial year to March 31 to 97.07 million tonnes, up 17% from a year earlier when the COVID-19 pandemic pushed production to the lowest in about 50 years.

METI estimated crude steel output at 24.15 million tonnes for the three-month period, up from 21.34 million tonnes a year earlier, also reflecting a demand pick-up in the autos sector, where production has been hit by chip and parts shortages.

Japanese carmakers such as Toyota and Nissan have seen production cuts since the summer.

“Our forecast is based on an assumption automakers will boost output to recover a loss from the recent months,” Daisuke Matsuno, director at the METI’s metal industries division, said.

“But there is a downside risk if car output does not rise according to their plans,” he told reporters.