Japanese Prime Minister Fumio Kishida will nominate Kazuo Ueda, a professor and former Bank of Japan board member, to take the helm of the BOJ from April, according to local media reports, in a surprise move that sparked a jump in the yen.
(Bloomberg) — Japanese Prime Minister Fumio Kishida will nominate Kazuo Ueda, a professor and former Bank of Japan board member, to take the helm of the BOJ from April, according to local media reports, in a surprise move that sparked a jump in the yen.
Masayoshi Amamiya, deputy BOJ governor, refused to take the post, the Nikkei newspaper reported Friday. Amamiya had been viewed as the top contender to replace Haruhiko Kuroda by economists. NHK, Yomiuri and Kyodo also reported that Ueda was in line for the nomination.
The yen strengthened as much as 1.4% against the dollar to 129.81 after the news from around 131.54, a move that suggests investors initially interpreted the decision as likely a hawkish choice.
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The choice suggests Kishida may not be seeking a drastic change at the central bank given the report said the premier wanted Amamiya to take the post. Ueda has expressed caution over raising interest rates prematurely.
“The market was completely taken by surprise.” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “Putting aside what kind of policy Ueda will take, the way the government has handled this seems a bit clumsy, having raised expectations that Amamiya will succeed.”
Kuroda’s tenure is set to expire in April after the longest stint at the helm of the central bank in its 140-year history.
After such a long period of stability in the BOJ governorship, the change of leadership is stoking market speculation that an adjustment of the policy path favoring massive stimulus could be in the works.
Inflation is already twice the central bank’s target and market pressure on its bond yield cap has already prompted a doubling of the permitted movement range.
Kuroda’s two deputies will also be replaced, with the nominations for the leadership positions due Tuesday.
Read More: How the BOJ Gets a New Governor and Why It Matters: QuickTake
Shinichi Uchida, BOJ’s executive director in charge of monetary policy and Ryozo Himino, former head of Japan’s financial watchdog were picked for the two deputy governor positions, according to the Nikkei.
The selection of Uchida, who has worked closely with Amamiya to conduct Kuroda’s monetary easing, would show the top leadership will still have have a veteran central banker associated with the stimulus program of the last decade.
The new deputies will assume their roles from March 20 once approved by parliament.
Ueda, 71, a professor at Kyoritsu Women’s University, was a BOJ board member from 1998-2005 when the central bank introduce a zero interest rate policy for the first time and embarked on quantitative easing.
Ueda is known for voting against pulling away from the zero rate in August 2000 when the government also officially requested the central bank to hold off from the move. The BOJ went ahead anyway and the decision became known as a key event for creating doubt over the BOJ’s willingness to ease for years to follow.
“Ueda’s relationship with the Bank of Japan is extremely strong so this choice was likely essentially made by the BOJ,” Takahide Kiuchi, a former BOJ board member and economist at Nomura Research Institute, wrote in a report. “You can’t say Ueda is against monetary easing but compared with Kuroda’s stance, he is on the cautious side.”
What Bloomberg Economics Says…
“We don’t think he would make an immediate push to jettison the yield curve control policy. Rather, his leadership — if confirmed — would inject a bit more balance into policy discussions, which are currently slanted toward maintaining maximum stimulus.”
— Yuki Masujima, economist
For the full report, click here
In a local media article last year, Ueda warned against raising rates too early. He said there wasn’t much scope for the BOJ to to increase rates, though that didn’t mean the chances were zero.
“In any case, a serious consideration will be required at some point in the future over the extraordinary monetary easing framework that has stayed in place for longer than many expected,” Ueda wrote in last year’s Nikkei article.
Ueda holds a Ph.D. from MIT and has maintained a close relationship with the BOJ as a professor even after he left the bank. He has moderated various BOJ conferences including one in November last year about the wage-growth mechanism.
“I think Ueda is a good choice,” said Nobuyasu Atago, chief economist at Ichiyoshi Securities. “Markets will probably want to depict him as a hawk or a dove but in my opinion, he is neither of them. He is someone who looks at the reality and seeks the best policy decision.”
–With assistance from Hideyuki Sano.
(Adds more comments from economists)
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