Kazuo Ueda, professor at the Graduate School of Economics at the University of Tokyo, speaks during the Spring Membership Meeting of the Institute of International Finance (IIF) 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, replacing current central bank chief Haruhiko Kuroda.
The Japanese yen strengthened 0.2% Tuesday morning after the nomination announcement and ended at 132.13 against the US dollar
Both houses of Japan’s parliament must now approve Ueda’s nomination. Prime Minister Fumio Kishida’s ruling coalition has a majority in both chambers. A parliamentary hearing is likely to take place on February 24, the 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 counterparts, Reuters reported, citing comments in parliament.
Policy normalization
Current governor Kuroda was first appointed in March 2013. He has led the central bank’s ultra-dovish monetary policy, including keeping interest rates negative since 2016 – even as global peers have stepped up to tackle inflation. The current five-year term will end on April 8.
Bank of America Global Research expects a gradual policy normalization under the central bank’s new leadership rather than a sudden change, according to the company’s economists led by Izumi Devalier.
The team said in a report that removing the central bank’s yield curve controls – a policy to keep the yield on Japan’s 10-year government bonds within 50 basis points of 0% – would not happen.
“We continue to think that changes in the BoJ’s policy framework (including leaving the YCC and negative interest rates) will be delayed until mid-2024,” the economists said, adding that they expected “flexibility” to change the current policy.
Economists added that it is “only a matter of time” before the Bank of Japan tweaks its yield curve control policy, and they expect a change in the first half of 2023.
‘suitable’ deputy
The Japanese government also reportedly announced nominees for other central bank roles including Shinichi Uchida, currently the central bank’s executive director, and Ryozo Himino, the former chief of Japan’s Financial Services Agency.
“The election of the deputy governor reported by the government is well suited to meet the challenge of accelerating and reducing the BoJ’s expansive easing program, in our view,” BofA economists said in a report ahead of the announcement.
Citi economists Kiichi Murashima and Katsuhiko Aiba added in a report that Uchida will play a “significant role.”
“It is highly likely that Mr. Uchida, who has been deeply involved in easing Haruhiko Kuroda, will play a pivotal role in monetary policy decisions,” they said in the report.
“We believe the monetary policy under the Ueda-Uchida regime would not be fundamentally different if the current deputy governor, Masayoshi Amamiya, had become governor,” he said.
The Nikkei previously reported that Amamiya was approached for the role but declined.