Ueda, Kishida agree no need to revise government-BOJ accord for now
NEW Bank of Japan (BOJ) governor Kazuo Ueda said he agreed with Prime Minister Fumio Kishida that there’s no need to revise the central bank’s joint agreement with the government for now, following his first meeting with Kishida after becoming BOJ chief.
“As a result of appropriate policy from both the BOJ and the government, we’re now in a situation where we’re not in a state of deflation,” Ueda told reporters in Tokyo on Monday (Apr 10) after meeting Kishida at the prime minister’s office. “We agreed the thinking behind the joint statement is appropriate, and there’s no need for an immediate review.”
The 2013 accord between the government and the central bank stated that the BOJ will seek to hit its inflation target as early as possible. Ueda’s comments suggest that the easy policy will continue.
Markets remained relatively calm on Monday, with the yen trading around 132.10 to the US dollar.
Kishida picked Ueda as the first new BOJ chief in a decade, meaning the first academic to take over the central bank’s top position also inherited a massive easing programme that saw US$11.7 trillion of spending under former chief Haruhiko Kuroda.
During his confirmation process in parliament following his nomination, Ueda indicated he will continue with monetary easing for now. That’s brought greater market focus to how much Ueda is concerned about the growing side effects of massive easing and the deteriorating functioning of financial markets.
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Speaking at his first news conference as governor later in the evening, Ueda said he wants to achieve the 2 per cent inflation target within his five-year term and will do his utmost to ensure stability of prices as well as the financial system.
“I have studied monetary policy for many years and been involved in policy operation and central banking in practical manners. Using this experience, I’d like to do my best to finish achieving the mission of price stability,” he said in the news conference also attended by his deputy governors Shinichi Uchida and Ryozo Himino.
The economy that Ueda is tackling is still below its pre-pandemic level, and faces risk of a global slowdown, making the recovery even slower. Inflation dynamics have shown increasing signs of shifting as businesses pass higher costs onto consumers at the fastest pace in decades, and deciding to raise wages by the most since the early 1990s.
In a sign of traders guarding themselves against potential yield curve control adjustments, Japan’s 10-year bond yields have climbed back up. That’s in sharp contrast to other major economies, where there’s been an easing of upward yield pressures following the banking crises in the US and Europe.
In his first parliamentary hearings for confirmation in February, Ueda said his biggest responsibility is to make the right call at the right time for policy as needed, whether it’s a change towards normalisation or continuing stimulus.
“If I’m appointed BOJ governor, my mission isn’t to come up with some kind of magical, special monetary policy,” Ueda said on Feb 24.
The 71-year-old is scheduled to host his first policy meeting on Apr 27-28. Mainly due to increasing signs of deterioration in financial market functioning, most BOJ watchers expect some kind of policy tightening by June, according to a Bloomberg survey published early last month.
Ueda earned his doctorate from the Massachusetts Institute of Technology after graduating from the University of Tokyo, and has been dubbed Japan’s Ben Bernanke by former Treasury secretary Larry Summers. Ueda is another on the list of central bank chiefs who are graduates of Stanley Fischer’s school of economics, adding his name alongside Bernanke and Mario Draghi.
At the age of 46, Ueda became a BOJ board member in 1998, and served in the position for seven years. During his term, Japan was struggling with the fallout of its own financial crisis and deflation. Ueda was “the pillar that ensured our theory wasn’t just pie in the sky”, then governor Toshihiko Fukui said at Ueda’s farewell meeting. BLOOMBERG
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