© Reuters. FILE PHOTO: A man walks past 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) – Japan’s government is expected to name academic Kazuo Ueda as its pick to become the next central bank governor on Tuesday, a surprise move that could increase chances of ending his unpopular money-control policy. performance.
Ueda, a 71-year-old former Bank of Japan policy board member and an academic at Kyoritsu Women’s University, will succeed incumbent Haruhiko Kuroda, whose second five-year term ends on April 8.
The government of Prime Minister Fumio Kishida is expected to submit its nomination to both houses of parliament on Tuesday.
Ueda’s long-awaited appointment, which was 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 career central banker like Lieutenant Governor Masayoshi Amamiya.
The government is also set to nominate Ryozo Himino, the former head of Japan’s banking watchdog, and BOJ executive Shinichi Uchida as deputy governors, sources told Reuters.
They will replace incumbents Amamiya and Masazumi Wakatabe, whose five-year terms expire on March 19.
Nominations need the approval of both houses of the Diet, which is effectively a done deal since the ruling coalition has solid majorities in both chambers.
The gubernatorial and lieutenant governor candidates will testify at confirmation hearings to be held on February 24 for the lower house and February 27 for the upper house.
With inflation surpassing the BOJ’s 2% target, Ueda faces the delicate task of normalizing his longstanding ultra-loose policy that has drawn mounting public criticism for distorting market functioning and crushing bank margins.
The leadership transition marks a historic end to Kuroda’s decade-long monetary experiment that sought to shake the public out of a deflationary mindset and could finally align Japan with other major economies toward higher interest rates.
International markets have been closely watching Kishida’s choice of the next BOJ governor for clues as to how soon the bank might phase out its yield curve control (YCC) policy.
Inflation hit 4% in December, double the BOJ’s 2% target, pushing up bond yields and challenging its resolve to defend YCC, a policy that caps 0.5% on the 10-year bond yield.
With markets creaking under the heavy-handed intervention of the BOJ, many investors are betting that the central bank will start raising rates under Kuroda’s successor.
In a Nikkei op-ed last July, Ueda warned against raising rates prematurely in response to inflation driven mainly by cost factors.
But he also wrote that the BOJ must eventually consider how to exit its ultra-loose policy, pointing to YCC’s potential flaws, such as the difficulty of maintaining the yield cap when inflation picks up.