TOKYO, Feb 24 — Incoming Bank of Japan (BOJ) Governor Kazuo Ueda will speak in parliament today, offering markets a first glimpse of how the new-look central bank could steer an exit from ultra-low interest rates.
Ueda’s confirmation hearing at the lower house, which will last for nearly three hours from 9.30am (0030GMT), comes as markets renew their attack on the central bank’s yield curve control (YCC) policy on bets of a near-term rate hike.
Earlier this month, the government named the 71-year-old academic as its pick to become next central bank governor in a surprise choice that markets saw as heightening the chance of an end to the unpopular YCC policy.
With inflation exceeding the BOJ’s 2 per cent target, Ueda faces the delicate task of phasing out YCC, which has drawn public criticism for distorting market functions and crushing banks’ margins.
People who know Ueda describe him as a pragmatist who is branded neither as a hawk nor a dove.
During his stint as BOJ board member from 1998 to 2005, Ueda played a key role in the bank’s introduction of forward guidance to enhance the effect of its zero-interest rate policy.
In a column issued last July, Ueda warned against raising rates prematurely but said the BOJ must eventually consider how to exit its ultra-loose policy.
Upon approval by parliament, he will succeed incumbent Haruhiko Kuroda, whose second, five-year term ends on April 8.
The government’s deputy governor nominees — former banking watchdog head Ryozo Himino and BOJ executive Shinichi Uchida — will testify in the afternoon after Ueda.
The upper house of parliament will hold the confirmation hearing for Ueda on Monday, and that for the two deputies on Tuesday.
The nominations need the approval of both chambers of the Diet, which are effectively a done deal as the ruling coalition holds solid majorities in both.
Under YCC, the BOJ guides short-term interest rates at -0.1 per cent and the 10-year bond yield around 0 per cent as part of efforts to sustainably achieve its 2 per cent inflation target.
Under pressure from rising global interest rates, the BOJ was forced to raise in December the implicit cap for its 10-year yield target to 0.5 per cent from 0.25 per cent — a move that fuelled market expectations of a near-term tweak to YCC. — Reuters
