The Bank of Japan raised its policy rate to 0.25 percent on July 31. That move, along with hawkish comments from Kazuo Ueda and expectations that the Federal Reserve will soon cut interest rates, sent the yen sharply higher.

That, in turn, sent Japanese stocks down, with the Nikkei Stock Average suffering its biggest one-day fall since 1987 on Monday. Global stock markets, including those in the United States, also fell.

"Recent market developments have been 'extremely volatile'," said Shinichi Uchida, head of the bank. Uchida, a career central banker, is considered a key figure in setting the Bank of Japan's monetary policy.

"The central bank is monitoring developments in these markets and their impact on economic activity and prices with great vigilance," Uchida said, adding that share prices and exchange rates require attention as they can affect business investment and inflation.

He highlighted the dovish stance of the Bank of Japan's current policy, observing that the 0.25 percent policy rate is actually very low after adjusting for inflation. "The central bank will therefore continue to support the economy by maintaining highly accommodative financial conditions." He took it that way.