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Incoming BOJ Governor's Views on Exit from Ultra-Easy Policy

Kazuo Ueda, the incoming governor of the Bank of Japan, stated he has ideas on how the bank could exit its massive stimulus. However, he added that shifting to a tighter policy would only occur when the country's trend inflation significantly heightens.

Kazuo Ueda, Governor of the Bank of Japan
Kazuo Ueda, Governor of the Bank of Japan

Reducing Bond Buying and Moving Toward Policy Normalization

Ueda stated that the central bank would reduce its bond-buying and move toward policy normalization when sustained achievement of its 2% inflation target becomes apparent. However, the central bank must maintain its ultra-easy policy because the inflation trend is currently short of the BOJ's target.

Comprehensive Review of BOJ's Monetary Easing Framework

Ueda is open to conducting a comprehensive review of the BOJ's monetary easing framework, proposed by board member Naoki Tamura. He suggested that any overhaul of Yield Curve Control may not come immediately after he takes the helm in April.

Key Gauge of BOJ's Monetary Policy

Ueda did not define trend inflation but stated that it is "above zero but short of 2%" and is a key gauge of the BOJ's monetary policy decision. He added that the BOJ's ultra-loose policy was appropriate as the benefits of the policy exceeded the costs.

Kazuo Ueda, Governor of the Bank of Japan
Kazuo Ueda, Governor of the Bank of Japan

Exit Strategy and BOJ's Inflation Target

Ueda stated that he saw no need for now to change the BOJ's 2% inflation target or language in a joint statement that the government signed in 2013. He also stated that the BOJ must always conduct various simulations of an exit plan even before sustained achievement of its 2% inflation target is foreseen.

Successor to Haruhiko Kuroda

Upon approval by parliament, Ueda will succeed incumbent Haruhiko Kuroda, who leaves behind a massive asset-buying program and a controversial bond yield control policy as his second, five-year term ends on April 8. Ueda praised Kuroda's policy for having reflated growth but stated that big monetary stimulus alone could not fire inflation, especially when large external shocks hit the economy.


Ueda stated that the BOJ must scrutinize whether the steps taken so far will be enough to address market distortions caused by YCC but declined to comment on what further measures could be taken once he takes the helm. He emphasized the need to maintain the ultra-loose policy for now and to be mindful of an unwelcome overshoot of inflation by maintaining a commitment to keep increasing money printing until inflation exceeds its 2% target.