Japan’s prime minister Fumio Kishida is likely to nominate as the next central bank governor Kazuo Ueda, a respected monetary policy expert who has previously warned against an early exit from Japan’s ultra-loose stance.
Two people with knowledge of the discussions said the government was expected to nominate the 71-year-old former Bank of Japan board member and professor at Kyoritsu Women’s University next week.
His appointment would end weeks of speculation among global investors over the successor to Haruhiko Kuroda, who is due to step down in April after overseeing a decade of policies designed to keep interest rates at ultra-low levels by buying vast quantities of government bonds.
In response to questions from reporters, Ueda declined to comment on whether he was approached by the government for the job. But he said: “The BoJ’s current monetary policy is appropriate. For now, I think it is necessary to continue easing measures.”
Kishida is also expected to nominate Ryozo Himino, former commissioner of the Financial Services Agency, and Shinichi Uchida, a BoJ executive who has played a central role in shaping Japan’s monetary policy, as deputy governors, according to Japanese media.
The yen briefly strengthened against the US dollar, rising more than 1 per cent to ¥129.81 before reversing course as markets digested the implications of the government’s choice. The yield on 10-year Japanese government bonds rose 1 basis point higher to reach 0.5 per cent — the upper limit of the band within which the BoJ attempts to control their movement.
Analysts said the selection of Ueda would signal a desire to appoint a technocrat who would base the BoJ’s monetary policy decisions on economic rationale rather than politics. Masayoshi Amamiya, the BoJ’s deputy governor and its chief monetary strategist, was previously considered the top candidate to succeed Kuroda.
“Mr Ueda was the most dovish member when he served on the BoJ board” between 1998 and 2005, said Kazuo Momma, a former head of monetary policy at the BoJ who is now executive economist at Mizuho Research Institute. “He is a committed deflation fighter and he is unlikely to take a sudden hawkish decision that would shock markets.”
In an interview in July with Nikkei, which initially reported the news of Ueda’s nomination, Ueda cautioned the BoJ against prematurely tightening its monetary policy. But he added that it would need to review its “unprecedented” easing framework at some point in the future: “There is a need for the BoJ to prepare an exit strategy.”
But a former top executive of one of Japan’s largest financial institutions and an acquaintance of Ueda noted that while the academic had been critical of Kuroda’s monetary policy, his critiques were “very scholarly and economics-oriented”.
In December, Kuroda surprised markets with a tweak to the central bank’s policy of controlling yields on the 10-year JGBs.
That abrupt shift prompted investors to challenge the BoJ’s assertion that it was not tightening its policy, causing government borrowing costs to surge and forcing policymakers to carry out record bond purchases to maintain its new ceiling.
Benjamin Shatil, foreign currency strategist at JPMorgan, said markets would take some time to work out how Ueda — if confirmed — would differ in his policy biases from Kuroda.
“Any initial market moves may prove to be a flash in the pan as traders turn their attention back to the incoming data from Japan which is showing record wage growth and persistent price pressures,” Shatil added.
One person close to Ueda said the former Tokyo University professor, many of whose students were now senior bureaucrats at the BoJ and finance ministry, had been an important voice on monetary policy during the 1990s when Japan was a pioneer in quantitative easing.
“He is thoughtful, he does not shoot from the hip,” the person said. “He is not someone that will be looking for big, quick wins.”
