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Japan appoints scholar Ueda as next central bank governor


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© Reuters. FILE PHOTO: A man walks in front of the Bank of Japan headquarters in Tokyo, Japan, January 18, 2023. REUTERS/Issei Kato/File Photo

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By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) – The Japanese government is expected on Tuesday to choose academic Kazuo Ueda as its next central bank governor, a surprise choice that could increase the chances of an end to its profit control policy. unpopular rate of this country.

Ueda, 71, a former Bank of Japan policy board member and scholar at Kyoritsu Women’s University, will succeed incumbent Haruhiko Kuroda, whose second five-year term ends on April 8. .

Prime Minister Fumio Kishida’s government is expected to present its nomination to both houses of parliament on Tuesday.

The expected appointment of Ueda, first reported by the newspaper and confirmed by Reuters on Friday, came as a surprise to many investors who had expected the job to go to a central banker. professional leaders such as vice-governor Masayoshi Amamiya.

The government will also nominate Ryozo Himino, a former head of Japan’s banking watchdog, and BOJ chief executive Shinichi Uchida as deputy governors, sources told Reuters.

They will replace incumbents Amamiya and Masazumi Wakatabe, whose five-year terms will end on March 19.

Nominations require approval from both houses of the Diet, which is actually a done deal as the governing coalition holds a solid majority in both houses.

The governor and deputy governor nominees will testify at confirmation hearings to be held on February 24 for the House and February 27 for the Senate.

With inflation well above the BOJ’s 2% target, Ueda faces the delicate task of normalizing its extremely easy policy that has drawn growing public criticism for doing so. market dysfunction and disrupt bank profitability.

The leadership transition marks a historic end to Kuroda’s decades-long currency experiment that sought to shock the public away from deflationary thinking, and possibly eventually bring Japan into the ranks. other major economies towards higher interest rates.

International markets are closely watching Kishida’s choice of the next BOJ governor for clues as to whether the bank can phase out its yield curve control (YCC) policy as soon as possible.

Inflation hit 4% in December, double the BOJ’s 2% target, pushing bond yields higher and challenging its resolve to defend YCC, a policy that places a 0.5% cap on 10-year bond yields year.

With the market crashing under the BOJ’s heavy hand, many investors are betting that the central bank will start raising interest rates under Kuroda’s successor.

In an opinion piece in the Nikkei newspaper last July, Ueda warned against raising interest rates prematurely in response to inflation driven mainly by cost-push factors.

But he also wrote that the BOJ must ultimately consider a way out of its extremely loose policy, pointing to potential flaws in the YCC such as difficulty maintaining yield caps when inflation soars.

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