Ueda's First Steps and Deputy Governors
Ueda's term began on Sunday, with Shinichi Uchida and Ryozo Himino serving as his deputy governors. The new central bank chief and his deputies will hold a joint news conference on Monday, providing insights on their policy direction and potential changes to bond yield control.
Expectations for Ueda's Approach to Monetary Policy
Despite Prime Minister Fumio Kishida's reluctance to comment on monetary policy, Natsuo Yamaguchi, chief of the Komeito party, expressed hopes for a gradual approach to shifting policies under Ueda's leadership. Markets are keen to see how Ueda might phase out the unpopular bond yield control policy, criticized for distorting markets and impacting bank margins.
Ueda's International Engagements
The central bank governor is set to meet with Kishida on Monday to receive his assignment letter. He will then travel to Washington D.C. to attend the G20 finance leaders' gathering and the International Monetary Fund spring meeting.
Inflation Target and Yield Curve Control Policy
During his parliamentary confirmation hearings in February, Ueda emphasized the importance of maintaining an ultra-easy policy to achieve the Bank of Japan's 2% inflation target. However, with inflation exceeding the target, many analysts expect changes to or discontinuing the yield curve control policy in the coming quarter.
Signs of Change in Japan's Inflation and Wage Growth
Japan's inflation and wage growth have shown promising signs of improvement. Core consumer inflation remains above 3%, and major firms have offered wage hikes of nearly 4% this year. The former BOJ deputy governor, Hiroshi Nakaso, predicts Ueda's new leadership will modify or abolish the yield curve control policy when appropriate.
Challenges for Japan's Export-Reliant Economy
U.S. recession fears pose a significant threat to Japan's export-dependent economy. While lifting COVID-19 restrictions boosts consumption, recent price hikes for everyday goods may also negatively impact spending.
Ueda's First Policy Meeting and Market Expectations
Ueda's inaugural policy meeting will take place on April 27-28, with updated growth and price forecasts for fiscal 2025. Market participants are eager to see if the board will project inflation accelerating towards or reaching 2% in fiscal years 2024 and 2025.
Ueda's Experience with the Bank of Japan
Kazuo Ueda served as a BOJ board member from 1998 to 2005, during which the central bank introduced zero interest rates and quantitative easing to combat deflation and economic stagnation.