In Surprise Twist, Japan Set To Appoint Ben Bernanke Classmate Kazuo Ueda As Next BOJ Head
Less than a week after the yen freaked out and tumbled on media reports (by Japan’s Nikkei) that Japan’s PM Fumio Kishida would nominate prominent dove and BOJ Deputy Governor Masayoshi Amamiya to replace Haruhiko Kuroda whose tenure ends April 8, in what was a clear trial balloon meant to gauge investor, early this morning we got news (once again from Japan’s Nikkei, the government’s preferred mouthpiece especially for market trial balloons), that the PM will nominate Kazuo Ueda instead, a professor and former Bank of Japan board member, but most importantly a far greater hawk than Amamiya, after the job was reportedly declined by the former.
The news came as a major surprise to market participants with the yen initially jumping as much as 1.4% against the dollar, suggesting investors initially interpreted Ueda as a hawkish choice.
Additionally, the government is also reportedly moving to appoint BOJ Executive Director Shinichi Uchida and former Commissioner of the Financial Services Agency Ryozo Himino as deputy governors, taking over from current deputy governors Masayoshi Amamiya and Masazumi Wakatabe.
Who is Kazuo Ueda?
Well, as Fed whisperer Nick Timiraos points out this morning, “Ueda has a Ph.D. in economics from MIT and, like his classmate Ben Bernanke, was advised by Stanley Fischer” adding that he has “largely supported the policies of Kuroda, as the next central bank governor.“
Ueda has a Ph.D. in economics from MIT and, like his classmate Ben Bernanke, was advised by Stanley Fischer
— Nick Timiraos (@NickTimiraos) February 10, 2023
He served as a BOJ Policy Board Member from 1998 until 2005, and his appointment would mark the first time in the post-war period that someone from an academic economics background takes on the role of BOJ governor. At the start of this week, reports emerged that the government had sounded out Deputy Governor Masayoshi Amamiya to take over as the next governor, but that he declined (February 10, Nikkei). Up to now, the governor post has been filled alternately by candidates from the Ministry of Finance and the BOJ, and the appointment of Kazuo Ueda would mark a departure from this practice.
Kazuo Ueda, an economist and former member of the BOJ Policy Board
As the BOJ Policy Board member at the time, Ueda led the introduction of “commitment effect” (forward guidance) when the BOJ adopted the zero interest rate policy (ZIRP) in 1999. He also voted against terminating the ZIRP in 2000. On the other hand, he was in the cautious camp on the BOJ’s implementation of quantitative easing (QE) in 2001, commenting that it is hard to find a positive meaning to QE.
On February 10, Ueda mentioned to the press that he thinks the current BOJ policy is conducted appropriately, and current conditions warrant continuation of the easy monetary policy. On the other hand, he has also recently said that the BOJ should prepare an exit strategy, and a serious examination is needed at some point on the current unprecedented monetary policy framework that has been in place for much longer than most people had expected (July 6, 2022, Nikkei).
In his book published just after returning to academia from the BOJ Policy Board, he stated that suppressing money market rates to the lowest possible level helped to prevent concerns about the financial system from mounting, but that came with a cost in the form of impaired financial market functioning. He also noted that financial market infrastructure was partially damaged, and believed that this would take a long time to restore.
In its post-mortem, Goldman writes that it agrees with the assessment that “Professor Ueda has a balanced view (February 10, Yomiuri), rather than being biased significantly as either a dove or a hawk” although the market clearly sees him as leaning hawkish.
The Japanese government is due to present its nominees for the BOJ Governor and two Deputy Governor positions to the Diet at 11am on February 14. Once the nominees have been presented, each candidate will be called for hearing at the lower and upper house committees in mid-to late February (media report lower house is being planned for February 24), and both houses will then take a vote to approve the appointments. While approval from each house is required, the ruling coalition holds a majority in both houses, so the process is likely to be smooth. Final approval is likely to come in late February or early March.
Meanwhile, the big question for traders is whether Kuroda’s successor will keep his easy monetary policy, which includes yield curve control. Critics have pointed both to accelerating inflation and the fact that most major central banks globally are raising rates.
Tyler Durden
Fri, 02/10/2023 – 09:46
In Surprise Twist, Japan Set To Appoint Ben Bernanke Classmate Kazuo Ueda As Next BOJ Head
Less than a week after the yen freaked out and tumbled on media reports (by Japan’s Nikkei) that Japan’s PM Fumio Kishida would nominate prominent dove and BOJ Deputy Governor Masayoshi Amamiya to replace Haruhiko Kuroda whose tenure ends April 8, in what was a clear trial balloon meant to gauge investor, early this morning we got news (once again from Japan’s Nikkei, the government’s preferred mouthpiece especially for market trial balloons), that the PM will nominate Kazuo Ueda instead, a professor and former Bank of Japan board member, but most importantly a far greater hawk than Amamiya, after the job was reportedly declined by the former.
The news came as a major surprise to market participants with the yen initially jumping as much as 1.4% against the dollar, suggesting investors initially interpreted Ueda as a hawkish choice.
Additionally, the government is also reportedly moving to appoint BOJ Executive Director Shinichi Uchida and former Commissioner of the Financial Services Agency Ryozo Himino as deputy governors, taking over from current deputy governors Masayoshi Amamiya and Masazumi Wakatabe.
Who is Kazuo Ueda?
Well, as Fed whisperer Nick Timiraos points out this morning, “Ueda has a Ph.D. in economics from MIT and, like his classmate Ben Bernanke, was advised by Stanley Fischer” adding that he has “largely supported the policies of Kuroda, as the next central bank governor.”
Ueda has a Ph.D. in economics from MIT and, like his classmate Ben Bernanke, was advised by Stanley Fischer
— Nick Timiraos (@NickTimiraos) February 10, 2023
He served as a BOJ Policy Board Member from 1998 until 2005, and his appointment would mark the first time in the post-war period that someone from an academic economics background takes on the role of BOJ governor. At the start of this week, reports emerged that the government had sounded out Deputy Governor Masayoshi Amamiya to take over as the next governor, but that he declined (February 10, Nikkei). Up to now, the governor post has been filled alternately by candidates from the Ministry of Finance and the BOJ, and the appointment of Kazuo Ueda would mark a departure from this practice.
Kazuo Ueda, an economist and former member of the BOJ Policy Board
As the BOJ Policy Board member at the time, Ueda led the introduction of “commitment effect” (forward guidance) when the BOJ adopted the zero interest rate policy (ZIRP) in 1999. He also voted against terminating the ZIRP in 2000. On the other hand, he was in the cautious camp on the BOJ’s implementation of quantitative easing (QE) in 2001, commenting that it is hard to find a positive meaning to QE.
On February 10, Ueda mentioned to the press that he thinks the current BOJ policy is conducted appropriately, and current conditions warrant continuation of the easy monetary policy. On the other hand, he has also recently said that the BOJ should prepare an exit strategy, and a serious examination is needed at some point on the current unprecedented monetary policy framework that has been in place for much longer than most people had expected (July 6, 2022, Nikkei).
In his book published just after returning to academia from the BOJ Policy Board, he stated that suppressing money market rates to the lowest possible level helped to prevent concerns about the financial system from mounting, but that came with a cost in the form of impaired financial market functioning. He also noted that financial market infrastructure was partially damaged, and believed that this would take a long time to restore.
In its post-mortem, Goldman writes that it agrees with the assessment that “Professor Ueda has a balanced view (February 10, Yomiuri), rather than being biased significantly as either a dove or a hawk” although the market clearly sees him as leaning hawkish.
The Japanese government is due to present its nominees for the BOJ Governor and two Deputy Governor positions to the Diet at 11am on February 14. Once the nominees have been presented, each candidate will be called for hearing at the lower and upper house committees in mid-to late February (media report lower house is being planned for February 24), and both houses will then take a vote to approve the appointments. While approval from each house is required, the ruling coalition holds a majority in both houses, so the process is likely to be smooth. Final approval is likely to come in late February or early March.
Meanwhile, the big question for traders is whether Kuroda’s successor will keep his easy monetary policy, which includes yield curve control. Critics have pointed both to accelerating inflation and the fact that most major central banks globally are raising rates.
Tyler Durden
Fri, 02/10/2023 – 09:46
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