Potential new BOJ chief likely to let data decide stimulus withdrawal

By Leika Kihara and Takahiko Wada

TOKYO, Feb 13 (Reuters) – Kazuo Ueda, the frontrunner of the next Bank of Japan governor, is unlikely to rush to revise his ultra-loose monetary policy and instead let economic data guide the timing of the exit, said Tetsuya Inoue, who was Ueda. personal secretary when he was a member of the board of directors of a central bank.

Markets are watching closely for clues about the monetary policy stance of Ueda, a 71-year-old academic who is expected to be appointed by the government as Governor Haruhiko Kuroda’s successor at the end of his term in April.

While on the BOJ board from 1998 to 2005, Ueda played a key role in introducing new monetary easing tools to combat the national banking crisis and debilitating deflation.

Inoue, a researcher at the Nomura Institute of Analysis, who has known Ueda since he was personnel secretary between 2000 and 2003, says he does not belong to any economic camp that can be explicitly described as “dovish ” (in favor of monetary easing) or “hawkish” (in favor of a tightening of financing conditions).

“His style is to discuss monetary policy based on facts and evidence,” Inoue told Reuters in an interview on Monday.

“He does not rely on a single model because he knows that the evolution of the economy and prices is very complex. Rather, he uses economic theories as tools to conduct monetary policy with flexibility.”

Unlike Kuroda, who rolled out massive stimulus shortly after becoming governor in 2013, Ueda is unlikely to rush to revise monetary policy as he will have time to assess whether inflation and wages will continue to rise. increase, Inoue said.

“Unlike Kuroda, Ueda won’t change things immediately after taking office. That’s not his style,” Inoue said.

“He will likely let economic data guide policy decisions.”

Ueda, a PhD in economics from the Massachusetts Institute of Technology (MIT), helped the Bank of Japan introduce “forward guidance” in 1999, a little-known concept at the time by which central banks pledged to hold rates very low interest rates in the hope of curbing the rise in long-term rates.

Since then, this practice has become widespread among central banks around the world.

If he becomes governor, Ueda could introduce a new monetary policy framework that could include a revamped type of “forward guidance”, Inoue said.

(Reporting by Leika Kihara and Takahiko Wada; Editing by Sam Holmes, Editing by Jose Munoz at Gdansk Newsroom)