(Bloomberg) — The Bank of Japan’s yield curve control and negative interest rates are appropriate amid the current economy, new Governor Kazuo Ueda said, signaling any significant changes to its monetary policy framework may be unlikely for the time being.
(Bloomberg) — The Bank of Japan’s yield curve control and negative interest rates are appropriate amid the current economy, new Governor Kazuo Ueda said, signaling any significant changes to its monetary policy framework may be unlikely for the time being.
Speaking at his inaugural news conference as governor, Ueda also said he’s open to the idea of a policy review from a longer-term standpoint, although he’d like to discuss it with other board members before any decision.
“Given the current economic, price and financial conditions, I think it’s appropriate to keep up the current yield curve control,” he said.
While many economists expected some form of change from the new governor by June in a Bloomberg survey published early last month, for now Ueda seemed to suggest that a shift isn’t necessary. Still, he kept his options open by saying there’s a need to closely watch developments, and that he’ll carefully explain should the BOJ make any changes to policy.
The yen retreated as Ueda spoke and Japanese bond futures ticked higher, suggesting his comments undermined bets for a significant policy move at this month’s meeting.
“Ueda indicated gradualism in any change for monetary policy,” said Hiroaki Muto, economist at Sumitomo Life Insurance Co. “Today’s remarks are likely to question growing market speculation that a YCC shift is taking place soon — as in between April and June.”
Muto added that Ueda linked shifts in yield control with the underlying inflation trend more strongly than expected, comments that counter views that the YCC needs to be revised to address side effects.
Kishida picked Ueda as the first new BOJ chief in a decade, meaning the first academic to take over the central bank’s top position also inherited a massive easing program that saw $11.7 trillion of spending under former chief Haruhiko Kuroda.
Read More: Kuroda Departs Leaving $11.7 Trillion Experiment to Successor
During his confirmation process in parliament following his nomination, Ueda had already indicated he will continue with monetary easing for now. That’s brought greater market focus to how much Ueda is concerned about the growing side effects of massive easing and the deteriorating functioning of financial markets.
Earlier in the evening, Ueda also met with Prime Minister Fumio Kishida and they agreed there’s no need to revise the central bank’s joint agreement with the government for now.
“As a result of appropriate policy from both the BOJ and the government we’re now in a situation where we’re not in a state of deflation,” Ueda told reporters in Tokyo Monday after meeting with Kishida at the prime minister’s office. “We agreed the thinking behind the joint statement is appropriate, and there’s no need for an immediate review.”
The 2013 accord between the government and the central bank stated the BOJ will seek to hit its inflation target as early as possible.
At the news conference, Ueda said he wants to achieve the 2% inflation target within his five-year term and will do his utmost to ensure stability of prices as well as the financial system. The 71-year old Ueda is scheduled to host his first policy meeting between April 27-28.
“I have studied monetary policy for many years and been involved in policy operation and central banking in practical manners. Using this experience, I’d like to do my best to finish achieving the mission of price stability,” he said in the news conference also attended by his deputy governors Shinichi Uchida and Ryozo Himino.
“We’ve been shown that even if the governor changes, it doesn’t mean that continued easing will change immediately,” said Mari Iwashita, a chief market economist at Daiwa Securities Co. “Once again we’re seeing that the central bank is a place that values continuity.”
–With assistance from Erica Yokoyama, Masaki Kondo, Keiko Ujikane, Cormac Mullen and Ritsuko Ando.
(Adds economist comments, more details)
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