The anticipated next governor of the Bank of Japan, Kazuo Ueda, is unlikely to hastily change their ultra-accommodative policy. Instead, he will rely on economic data to dictate the timing of any policy shifts, according to Tetsuya Inoue, who served as Ueda's staff secretary when he was a central bank board member.
Investors and market participants are eagerly awaiting Ueda's policy stance, as the 71-year-old academic is poised to take the reins from current governor Haruhiko Kuroda when his term expires in April.
As a BOJ board member from 1998 to 2005, Ueda played a critical role in the implementation of new monetary easing measures aimed at addressing the domestic banking crisis and persistent deflationary conditions.
According to Tetsuya Inoue, a senior researcher at Nomura Research Institute who worked closely with Ueda during his time as staff secretary from 2000 to 2003, Ueda does not align himself with any particular economic ideology that could be easily characterized as dovish or hawkish.
According to Inoue, Ueda's approach to monetary policy is based on facts and evidence. He doesn't rely on just one model to guide his decisions, recognizing that economic and price movements are complex. Instead, he utilizes economic theories as flexible tools to inform his policy choices.
In comparison to Governor Kuroda, who swiftly implemented significant stimulus measures after taking office in 2013, Ueda is not expected to make hasty policy changes. He will have the opportunity to assess whether inflation and wages will continue to rise before adjusting policy, said Inoue.
According to Inoue, Ueda will not immediately make drastic changes upon assuming the post of governor. This is not his mandate, and instead, he will likely let economic data inform his policy decisions.
As an economics PhD holder from the Massachusetts Institute of Technology (MIT), Ueda played a role in the introduction of forward guidance at the BOJ in 1999, a novel concept at the time in which central banks pledge to maintain ultra-low interest rates to prevent increases in longer-term rates. This concept has since been widely adopted by central banks globally.
If Ueda becomes governor, he may introduce a new monetary policy framework that could include an updated form of forward guidance, said Inoue. In a book he published in 2005 discussing the BOJ's struggle against deflation, Ueda noted that Japan's struggling banking system at the time hindered the effectiveness of ultra-low interest rates as a stimulus measure.
The 2008 collapse of Lehman Brothers heightened global policymakers' recognition of the impact that problems in the banking sector can have on economies, according to Inoue. If Ueda becomes governor, he is likely to place a strong emphasis on preserving financial system stability, added Inoue.
