- Bank of America Global Research expects a gradual normalization of monetary policy under the new central bank leadership rather than an abrupt switch.
- Citi said: “It is very likely that Mr. Uchida, who was deeply involved in Haruhiko Kuroda’s easing, will play a crucial role in monetary policy decisions.”
Kazuo Ueda, Professor of the Graduate School of Economics at the University of Tokyo, speaks during the Spring Members Meeting of the Institute of International Finance (IIF) in Tokyo, Japan on Tuesday, May 9, 2017.
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Kazuo Ueda is set to become the next Bank of Japan governor, succeeding current central bank governor Haruhiko Kuroda.
The Japanese yen gained 0.2% on Tuesday morning following the announcement of the nomination and last stood at 132.13 against the US dollar
Both chambers of the Japanese parliament must now approve Ueda’s nomination. Prime Minister Fumio Kishida’s coalition government has a majority in both chambers. Parliamentary hearings are expected to take place on February 24, Nikkei reported.
Kishida recently stressed that the next central bank governor must have “global communication skills” and be able to coordinate closely with global peers, Portal reported, citing his remarks in parliament.
The current governor, Kuroda, was first appointed in March 2013. He has guided the central bank’s ultra-dovish monetary policy, including maintaining a negative interest rate since 2016 – even as global competitors tried to fight inflation. His current five-year term ends on April 8.
According to the firm’s economists, led by Izumi Devalier, Bank of America Global Research expects a gradual normalization of monetary policy under the new central bank leadership rather than an abrupt switch.
The team said in a report that the central bank’s full lifting of yield curve control — a policy to keep 10-year Japanese government bond yields within a 50 basis point range of 0% — is not going to happen anytime soon.
“We continue to believe that any change in the BoJ’s policy framework (including the abandonment of YCC and negative interest rates) will be delayed until mid-2024,” the economists said, adding that they instead expect “flexibility” in changing current policy .
The economists added that it is “only a matter of time” before the Bank of Japan adjusts its yield curve control policy and they expect changes within the first half of 2023.
The Japanese government also reportedly announced its candidates for other positions at the central bank, including Shinichi Uchida, current executive director of the central bank, and Ryozo Himino, the former head of the Japan Financial Services Agency.
“The government-reported deputy gubernatorial election is also well-placed, in our view, to address the challenge of tightening and unwinding the BoJ’s expansionary easing program,” BofA economists said in their report ahead of the announcement.
Citi economists Kiichi Murashima and Katsuhiko Aiba added in a report that Uchida will play a “crucial role.”
“It is very likely that Mr. Uchida, who was deeply involved in Haruhiko Kuroda’s easing, will play a central role in monetary policy decisions,” they said in a report.
“We believe that monetary policy under the Ueda-Uchida regime will not be fundamentally different than if the current deputy governor, Masayoshi Amamiya, became governor,” they said.
Nikkei previously reported that Amamiya was approached for the role but was turned down.