Corporate Japan Girds for Revolution at Bank of Japan
Quick Summary
Kazuo Ueda has been selected as the next governor of the Bank of Japan, breaking decades of tradition by appointing an academic to the post. Corporate Japan is now bracing for policy normalisation and possible economic readjustment under Ueda’s tenure, as his predecessor deployed over $331bn to defend its yield curve control policy. Despite some perceived risk, many analysts suspect Ueda will continue to prioritize maintaining an accommodating monetary environment and navigating the current “abnormal” situation.
Full Story – Corporate Japan is bracing itself for change at the BoJ
The surprise selection of Kazuo Ueda to become the next governor of the Bank of Japan will break with decades of tradition and put an academic on that prickly throne for the first time in the postwar period.
Despite his longstanding prominence, combing through Ueda’s previous comments for hints of what his appointment might mean for the cost of money is heavy going.
Everyone is ravenous for guidance on what might happen should long-term interest rates creep higher — none more so than corporate Japan, which must not only confront the possibility of BoJ policy normalisation for the first time in nearly a quarter century (and several generations of senior management), but also recognise that normal was never all that normal. So how big might the coming readjustment storm be?
Barely in doubt, as Ueda takes his turn at the helm, is that the situation he inherits is deeply abnormal. Views differ on the peril (or lack of it) in Japan’s gross debt standing at 260 per cent of gross domestic product. But the BoJ’s 56 per cent ownership of the Japanese government bond market, and the $331bn it has deployed since December 1 defending its yield curve control (YCC) policy, clearly point to market dysfunction. Several front-runners for the governor job are known to have turned it down, which suggests a significant perceived risk of reputational injury. In theory, therefore, the wrench of even the slightest normalisation could be severe.
Many analysts suspect Ueda will…
