Kazuo Ueda, nominated to lead a Bank of Japan that’s backing ESG efforts, has voiced skepticism in the past about monetary authorities getting involved in green policies.
(Bloomberg) — Kazuo Ueda, nominated to lead a Bank of Japan that’s backing ESG efforts, has voiced skepticism in the past about monetary authorities getting involved in green policies.
Policy makers can respond to climate change by taxing greenhouse gas emitters or applying quotas, but that’s more of a job for fiscal authorities than the central bank, the 71-year-old economist wrote for the Nikkei in December 2021. If the central bank gets too involved in fiscal policy, the government may respond by interfering more in monetary policy, he said.
Supporting green investments with a long-term provision of funds may also conflict with the need to drain liquidity when inflation accelerates, and that could lead to a negative effect on the central bank’s operations, said Ueda. His views will be questioned in parliamentary hearings from Feb. 24 after his nomination.
“The BOJ’s loans for the operation are expanding now, but this trend may pause,” said Toshiyasu Ohashi, chief credit analyst at Daiwa Securities Co. “The market may lose extra support to boost demand for ESG bonds.”
While Ueda has published widely and may have spoken publicly on his views on ESG more recently, a search by Bloomberg didn’t show any comments on the subject after 2021.
Ueda’s surprise nomination has prompted investors to speculate on whether he will push for big changes to outgoing Governor Haruhiko Kuroda’s super-easy monetary policy, but his stance on ESG will also be closely watched as the global market for sustainable assets grows larger.
Other central banks have varied views on how to fight climate change: while Federal Reserve Chair Jerome Powell has vowed to limit the Fed’s involvement in climate policy, others are taking action such as the European Central Bank, which has favored corporate-debt issuers that pollute less in its portfolio.
The BOJ, for its part, offers a series of incentives for lenders to help businesses move toward a greener economy through a climate-change financing operation. Investors will be watching whether that program will be changed under the new leadership.
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