Ueda Receives Endorsement from Japanese Parliament for BOJ Governors Role

Japan’s parliament recently endorsed academic Kazuo Ueda as the next Bank of Japan governor. However, this move involves minimizing the central bank’s protracted monetary easing side effects, ultimately leading the way for an exit strategy once its inflation target is achieved. Ueda, a monetary policy expert, is set to take over from Haruhiko Kuroda, who has been BOJ chief for ten years, on April 9.

The House of Councillors’ approval of Ueda sets the stage for his formal appointment, as the more potent House of Representatives gave the go-ahead a day earlier. As a result, Ryozo Himino, a former commissioner of the Financial Services Agency, and Shinichi Uchida, an executive director at the BOJ, will succeed Masayoshi Amamiya and Masazumi Wakatabe as deputy governors for five-year terms beginning March 20.

The new BOJ leadership has been lauded by analysts as well-balanced, with Ueda as a monetary policy expert whose theoretical knowledge helped the BOJ introduce a zero-interest-rate policy and embark on quantitative easing. He sat on the decision-making Policy Board between 1998 and 2005. Himino, 62, is an internationally-minded financial regulator, while Uchida, 60, knows the central bank’s inner workings as he has been in charge of policy design under Kuroda.

On his last policy-setting meeting as governor, Kuroda said, “I know Ueda very well, and he is an excellent economist who is well-versed in monetary policy. I hope he will guide monetary policy appropriately based on real-time economic, price, and financial conditions once he assumes the post of governor.”

The BOJ’s attempt to keep short-term and long-term interest rates at rock-bottom levels has led to bloated balance sheets and aggressive government bond purchases. One of the side effects of BOJ’s dovish stance is a weak yen. Ueda’s appointment indicates that PM Fumio Kishida wants a slow departure from the “Abenomics” economy-boosting program, wherein powerful monetary easing was a major pillar.

Key Takeaways:

Japan’s parliament endorsed academic Kazuo Ueda as the next Bank of Japan governor, along with Ryozo Himino and Shinichi Uchida for the deputy governor roles.

Ueda’s responsibility as BOJ chief will be to minimize the central bank’s protracted monetary easing side effects and lead the way for an exit strategy once the inflation target is achieved.

The new BOJ leadership has been lauded as well-balanced, with Ueda as a monetary policy expert, Himino as an internationally-minded financial regulator, and Uchida as someone who knows the central bank’s inner workings.

Ueda’s appointment is seen as a slow departure from the “Abenomics” economy-boosting program, indicating a gradual abandonment of powerful monetary easing.

Related Facts:

The BOJ has been trying to keep short-term and long-term interest rates at rock-bottom levels, which has led to aggressive government bond purchases and bloated balance sheets.

BOJ’s dovish stance has led to a weak yen, which has fallen to levels not seen in decades against the US dollar, inflating import costs for the resource-poor nation.

Conclusion:

Ueda’s appointment marks a significant few years ahead for Japan’s economy. The BOJ has been struggling to pocket its 2% inflation target, leading to doubts about whether its policy tools can combat forces like technological progress and demographics weighing on prices. Given Ueda’s vast experience with monetary policy, he may be the right person to steer Japan’s monetary policy. Moreover, the new BOJ leadership is seen as well-balanced, which may enable it to achieve its targets without causing undue disruption.