TOKYO, Feb 14 — Japan’s government is expected today to name academic Kazuo Ueda as its pick to become next central bank governor, a surprise choice that could heighten the chance of an end to its unpopular yield control policy.
Ueda, a 71-year-old former Bank of Japan (BoJ) policy board member and an academic at Kyoritsu Women’s University, will succeed incumbent Haruhiko Kuroda, whose second, five-year term ends on April 8.
Prime Minister Fumio Kishida’s government is expected to present its nomination to both houses of parliament today.
The expected appointment of Ueda, which was first reported by the Nikkei newspaper and confirmed by Reuters on Friday, came as a surprise to many investors who expected the job to go to a career central banker like deputy governor Masayoshi Amamiya.
The government is also set to nominate Ryozo Himino, former head of Japan’s banking watchdog, and BOJ executive Shinichi Uchida as deputy governors, sources have told Reuters.
They will replace incumbents Amamiya and Masazumi Wakatabe, whose five-year terms end on March 19.
The nominations need the approval of both chambers of the Diet, which is effectively a done deal since the ruling coalition holds solid majorities in both chambers.
The governor and deputy governor nominees will testify at confirmation hearings to be held on February 24 for the lower house, and February 27 for the upper chamber.
With inflation exceeding the BOJ’s 2 per cent target, Ueda faces the delicate task of normalising its prolonged ultra-easy policy that has drawn increasing public criticism for distorting market function and crushing bank margins.
The leadership transition marks a historical end to Kuroda’s decade-long monetary experiment that sought to shock the public out of a deflationary mindset, and could finally align Japan with other major economies toward higher interest rates.
International markets have been closely watching Kishida’s choice of next BOJ governor for clues on how soon the bank could phase out its yield curve control (YCC) policy.
Inflation hit 4 per cent in December, double the BOJ’s 2 per cent target, pushing up bond yields and challenging its resolve to defend YCC, a policy that sets a 0.5 per cent cap on the 10-year bond yield.
With markets creaking under the BOJ’s heavy-handed intervention, many investors are betting the central bank will start hiking rates under Kuroda’s successor.
In an opinion piece in the Nikkei last July, Ueda warned against prematurely raising rates in response to inflation driven mostly by cost-push factors.
But he also wrote the BOJ must eventually consider how to exit its ultra-loose policy, pointing to the potential flaws of YCC such as the difficulty of maintaining the yield cap when inflation perks up. — Reuters
