Kazuo Ueda, a professor at the University of Tokyo Graduate School of Economics, speaks during the Institute of International Finance (IIF) Spring Membership Meeting in Tokyo, Japan, Tuesday, May 9, 2017.
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Kazuo Ueda is set to become the next governor of the Bank of Japan, succeeding current central bank chief governor Haruhiko Kuroda.
The Japanese yen reinforced 0.2% on Tuesday morning after the nomination was announced and last stood at 132.13 against the US Dollar
Both houses of the Japanese parliament must now approve Ueda’s appointment. Prime Minister Fumio Kishida’s ruling coalition has a majority in both houses. Parliamentary hearings are likely to take place on February 24, Nikkei reported.
Kishida recently stressed the need for the next central bank governor to have “global communication skills” and be able to coordinate closely with global peers, Reuters reportedciting his comments in parliament.
Policy standardization
Current Governor Kuroda was first appointed in March 2013. He has led the central bank’s ultra-dovish monetary policy, including maintaining a negative interest rate since 2016 – even as his global peers increased to fight inflation. His current five-year term will end on April 8.
Bank of America Global Research expects a gradual normalization of policy under new central bank leadership instead of an abrupt change, according to company economists led by Izumi Devalier.
The team said in a report that the complete removal of central bank yield curve control – a policy of keeping 10-year Japanese government bond yields within 50 basis points of 0 % – won’t happen anytime soon.
“We continue to believe that a change in the BoJ’s policy framework (including abandoning the YCC and negative interest rates) will be delayed until mid-2024,” the economists said, adding that ‘they expect to see “flexibility” in changing the current policy.
Economists added that it is “only a matter of time” before the Bank of Japan changes its yield curve control policy, and they expect to see changes in the first semester 2023.
“Well-placed” deputies
The Japanese government has also reportedly announced its candidates for other central bank positions, including Shinichi Uchida, currently the central bank’s executive director, and Ryozo Himino, the former head of Japan’s Financial Services Agency.
“The deputy governor’s picks reported by the government are also well suited to meet the challenge of streamlining and phasing out the BoJ’s extensive easing program, in our view,” BofA economists said in their paper. report before the announcement.
Citi economists Kiichi Murashima and Katsuhiko Aiba added in a report that Uchida will play a “central role.”
“Mr. Uchida, who was deeply involved in easing Haruhiko Kuroda, is highly likely to play a central role in monetary policy decision-making,” they said in a report.
“We believe that monetary policy under the Ueda-Uchida regime will not be fundamentally different from what it would have been if the current deputy governor, Masayoshi Amamiya, had become governor,” they said.
Nikkei earlier reported that Amamiya was approached for the role but declined.