Ueda, an economist and former BOJ policy board member would replace Haruhiko Kuroda, whose term ends on April 8, 2023.
Ueda's Potential Impact on Monetary Policy
The yen gained against the dollar, reaching a one-week high, but later tempered its gains. The BOJ declined to comment on the appointment. Ueda would oversee the continuation of the BOJ's ultra-low interest rate policy while other major central banks increase rates to tackle inflation.
Depreciation and Interventions of the Yen
The yen reached 20-year lows against the U.S. dollar in 2022 due to interest rate differentials and market volatility. A weaker yen is seen as beneficial for Japanese policymakers, but its depreciation and impact on consumers have prompted interventions to stabilize the currency.
Kuroda's Yield Curve Control Policy
Kuroda has defended the BOJ's yield curve control policy, which keeps the tolerance range for the yield in tight range. In December 2022, the BOJ shocked global markets by widening the 10-year Japanese government bond yield.
Ueda's Nomination and Market Reaction
Ueda, BOJ Executive Director Shinichi Uchida, and former chief of the Financial Services Agency Ryozo Himino will be officially nominated as governors on Tuesday. While Ueda was not considered a leading candidate by many, Rabobank's Jane Foley believes that BOJ policies will remain the same. Hiroaki Muto, an economist at Sumitomo Life Insurance, sees Ueda as conducting policy based on economic fundamentals but added that any normalization would take place slowly.