Exploring Japan’s Necessity to Adapt Its Monetary Policy: An Analysis
The Japanese government has nominated academic economist Kazuo Ueda as the next central bank governor. This unexpected decision has made the direction of the Bank of Japan’s (BOJ) monetary policy difficult to predict. Researchers at ANBOUND have noted that the BOJ faces a dilemma in the case of inflation exceeding the target, as well as international capital betting on a change in the country’s monetary policy. Ueda is familiar with the BOJ’s quantitative easing policy, but his views on inflation remain uncertain. This reflects the continued unpredictability of Japan’s policy orientation.
By Wei Hongxu*
The Japanese government officially nominated academic economist Kazuo Ueda as the next central bank governor on February 14. This unexpected decision also makes the direction of the Bank of Japan’s (BOJ) monetary policy, which has been under market scrutiny, even more difficult to grasp. On the same day, the yen edged higher against the dollar. Most Japanese stock indexes maintained their gains, with the Nikkei 225 climbing 0.6%. This reaction shows that the market still has a more cautious optimism about the BOJ’s policy changes.
However, researchers at ANBOUND had p previously pointed out that the BOJ still faces a huge dilemma in the case of inflation exceeding the target, as well as international capital betting on a change in the country’s monetary policy. This also led to its monetary policy facing uncertainty. In addition, according to previous reports in the Japanese media, three potentially popular candidates for governor, whether they adhere to the super-easy policy, including Masayoshi Amamiya or quantitative easing policy critic former BOJ deputy governor Yukio Yamaguchi, as well as another former deputy governor Hiro Nakasone are unwilling to assume this position. This reflects not only the quandary facing BOJ but also the fact that Kazuo Ueda becomes the new governor indicates the very few alternatives left for the Japanese government.
There is not much information about Ueda’s thoughts on Japan’s monetary policy and the Japanese economy, and very little is known about his views and position on the direction. Considering his experiences, Ueda is arguably one of those most familiar with the BOJ’s quantitative easing policy. However, he has been more pragmatic in expressing his views on inflation in several articles published last year. As the current changes in the market remain unclear, this reflects there is continued unpredictability about Japan’s policy orientation. ANBOUND’s researchers have noted that…