Japan names academic Ueda as next central bank governor

Japan names academic Ueda as next central bank governor

  • Election judged a surprise by Ueda could end YCC
  • Hearings to confirm Parliament will take place on February 24 and 27
  • Ueda warns against premature tightening, points out the pitfalls of the YCC

TOKYO, February 14 (Portal) – Japan’s government has named academic Kazuo Ueda as the next central bank governor, a surprise choice that could increase the chance of an end to its unpopular yield control policies.

Ueda, a 71-year-old former Bank of Japan executive and an academic at Kyoritsu Women’s University, will succeed incumbent Haruhiko Kuroda, whose second five-year term ends on April 8, according to documents submitted to parliament on Tuesday.

Ueda’s appointment, first reported by the Nikkei newspaper and confirmed by Portal on Friday, came as a surprise to many investors who had expected the job to go to a career central banker like Deputy Governor Masayoshi Amamiya.

International markets have been closely watching Prime Minister Fumio Kishida’s election of the next BOJ governor for clues as to how soon the bank may be phasing out its Yield Curve Control (YCC) policy.

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The leadership change marks an historic end to Kuroda’s decades-long monetary experiment aimed at shocking the public out of a deflationary mindset and could eventually propel Japan towards higher interest rates with other major economies.

With inflation surpassing the BOJ’s 2% target, Ueda faces the tricky task of normalizing its ongoing ultra-loose policy, which has come under increasing public criticism for distorting market function and narrowing bank margins.

Data released on Tuesday showed that Japan’s economic recovery was weaker than expected in the final quarter of last year, underscoring a weak recovery faced with headwinds from slowing global growth.

Analysts expect Ueda, which has warned of the dangers of premature rate hikes in the past, to be reluctant to tighten monetary policy but will disband YCC sooner rather than later.

“I don’t think Ueda will sit idly by on a policy that hasn’t worked and is showing increasing side effects,” said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

The government also nominated Ryozo Himino, the former head of Japan’s banking regulator, and BOJ board member Shinichi Uchida as deputy governors, the documents showed.

They will replace incumbents Amamiya and Masazumi Wakatabe, whose five-year terms end on March 19.

The nominations require the approval of both chambers of the state parliament, which is actually a done deal, since the governing coalition has solid majorities in both chambers.

The candidates for governor and deputy governor will testify at confirmation hearings on February 24 for the lower house and February 27 for the upper house, sources told Portal.

The dates of the confirmation hearings have not yet been formally set.

Inflation hit 4% in December, doubling the BOJ’s 2% target, sending bond yields higher and calling into question their resolve to defend YCC, a policy that capped yields at 0.5% 10-year bonds.

With markets creaking under the BOJ’s stubborn intervention, many investors are betting that the central bank will hike rates under Kuroda’s successor.

In an opinion piece in the Nikkei last July, Ueda warned against raising interest rates prematurely in response to inflation, which is mainly being driven by cost-pushing factors.

But he also wrote that the BOJ must eventually consider how to end its ultra-loose policies, noting YCC’s potential shortcomings such as: B. Difficulty maintaining the yield cap when inflation picks up.

Reporting by Tetsushi Kajimoto and Leika Kihara; Additional reporting by Eimi Yamamitsu; Editing by Sam Holmes

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