Taiwan is said to favour Yang Chin-long as central bank chief

[TAIPEI] President Tsai Ing-wen favours choosing monetary policy maker Yang Chin-long to become the next chief of Taiwan's central bank, according to a person familiar with the matter.

Mr Yang, the central bank's deputy governor, is set to succeed Perng Fai-nan, 79, when he steps down in February, the person said. After two decades in the position, Mr Perng is one of the world's longest-serving central bank governors. Presidential Office spokesman Lin Ho-ming declined to confirm Mr Yang's appointment, saying the government would announce who the new governor will be as soon as it has been decided.

"It's not a surprise at all as the president is looking for someone who can maintain stability for currency and monetary policies," said Gordon Sun, director at the Taiwan Institute of Economic Research.

President Tsai Ing-wen said earlier that the next governor must be determined to maintain economic stability. Good communication with other government departments on forging policy is also among requirements for next candidate, she said.

Given Mr Yang's role as deputy, he is likely to follow Mr Perng's stance, making the transition seamless. Mr Yang could address concerns of industries that want no drastic changes. "He is a safe card as the administration avoids controversies in the run-up to local elections late this year," Mr Sun said.

The appointment is in line with economist expectations. Mr Yang was the leading contender for the post, according to a recent Bloomberg survey of economists. With economic growth forecast to hold up in 2018 as inflation remains moderate, a leadership transition isn't seen as reshaping the policy outlook. Economists forecast modest tightening of borrowing costs later this year.

The president cited Mr Yang's strong knowledge of the economy and experience of currency markets as reasons for her choice, the person familiar said. The new governor's five-year term would normally end in February 2023, with no limit on consecutive terms.

Mr Perng began his tenure as central bank chief by defending the Taiwan dollar during the Asian financial crisis, and he has long prioritised stability. Economic output has nearly doubled under his two decades steering policy. The transparency of monetary policy also improved under his governance - the central bank has started releasing quarterly meeting minutes.

The incoming governor may face a more benign situation than Mr Perng did when he arrived, with export prospects bright amid robust global growth. Still, the central bank must address challenges including capital outflows and currency-depreciation pressure as major economies normalise monetary policy. The benchmark interest rate has been unchanged at 1.375 per cent since June 2016.

"Taiwan's next central bank captain would face challenges including monetary tightening this year from neutral last year on the global front," Mr Sun said. "The sooner the appointment of a new governor the better - it would be a relief for those concerned."

BLOOMBERG