Japan’s government has selected Kazuo Ueda, a former Bank of Japan policy board member and academic, to succeed Haruhiko Kuroda as the next central bank governor. Kuroda’s second five-year term ends on April 8, and Ueda will take charge of his first BOJ policy meeting on April 27-28, pending parliamentary approval. Ueda’s nomination as the next governor was a surprise choice and may signal an end to the country’s unpopular yield control policy.
The central bank has been pursuing a “monetary experiment” for a decade to shock the public out of a deflationary mindset, but the incoming leadership transition marks a historical turning point. Ueda has previously expressed concerns about raising interest rates prematurely in response to inflation driven mostly by cost-push factors, although he has also warned of the potential flaws of the current yield curve control (YCC) framework that combines negative short-term rates with a 0.5% bond yield cap.
Some analysts have cautioned that Japan’s fragile economic recovery may make it difficult to end its ultra-easy monetary policy this year. The BOJ may have to wait until fiscal year 2024 at the earliest, said Takeshi Minami, chief economist at Norinchukin Research Institute. Japan’s economy has been hampered by the coronavirus pandemic, which has prompted several states of emergency and undermined the country’s tourism industry.
The leadership change at the BOJ has raised hopes among market watchers that Japan could eventually align with other major economies toward higher interest rates. However, some experts believe that the country is still a long way from normalizing its monetary policy. Ueda’s selection as the next governor signals a shift in direction for the BOJ, which could eventually end the unpopular yield control policy and lead to an eventual rate hike.
Overall, Ueda’s nomination as the next governor of the BOJ is a significant development for Japan’s monetary policy. The central bank has been grappling with a deflationary mindset and sluggish economic growth for years, and the incoming governor will have to navigate a complex economic environment. Ueda’s academic background and experience in policy-making could help steer the central bank in a new direction as it seeks to promote price stability and economic growth.