New Governor of the Bank of Japan Kazuo Ueda waits for Japanese Prime Minister Fumio Kishida in Tokyo on April 10, 2023.
Kimimasa Mayama | afp | beautiful pictures
Japan’s new central bank governor Kazuo Ueda on Monday said he would be in close contact with the government and provide flexible monetary policy guidance, warning of high uncertainty over the outlook. economy.
Ueda faces a bumpy road as slowing global growth obscures prospects for inflation and sustained wage growth, a precondition for phasing out its predecessor’s controversial monetary stimulus package. .
“Given the high economic uncertainty, the BOJ will be in close contact with the government and provide monetary policy guidance,” Ueda told reporters after meeting Prime Minister Fumio Kishida to receive his official appointment letter. flexible way”.
Ueda also said he agrees with the prime minister that there is no need to immediately amend the joint statement between the government and the BOJ, under which the central bank is committed to achieving the 2% inflation target as soon as possible.
The 71-year-old scholar’s term begins on Sunday, succeeding Haruhiko Kuroda, whose second five-year term ends on Saturday. Ueda and his two deputy governors, Shinichi Uchida and Ryozo Himino, will hold a joint press conference at 10:15 GMT on Monday.
Markets will be looking for clues that Ueda may soon phase out its unpopular bond yield controls that have been criticized for distorting markets and hurting bank profits.
During congressional confirmation hearings in February, Ueda emphasized the need to maintain ultra-easy policy to ensure Japan achieves the BOJ’s 2% inflation target in a sustainable manner. supported by wage growth.
But with inflation above target, many analysts expect the BOJ to adjust or end yield curve control (YCC), a policy that combines a 0.1% target for short-term interest rates and a 0.1% target. 0% ceiling on 10-year bond yields, as in this quarter.
“The growing side effects are an indication that the policy effect (of the YCC) is having an impact on the economy,” former BOJ deputy governor Hiroshi Nakaso was quoted as saying in an interview with the Nikkei newspaper.
“When the time is right, the new leadership of the BOJ will likely amend or repeal the YCC,” he said.
Japan’s long-stagnant inflation and wage growth are showing signs of changing. After hitting a 41-year high of 4.2% in January, core consumer inflation remained above 3% as many companies raised prices to cope with rising raw material costs.
To compensate households for rising costs of living, major companies have offered to raise wages by nearly 4% this year in annual labor negotiations, the fastest pace in about three decades. .
In his last press conference as governor on Friday, Kuroda said Japan is getting closer to achieving a sustainable 2% inflation rate due to the long-standing public perception that prices will not rise. is starting to change.
However, growing recession fears in the US are among the obstacles to Japan’s export-reliant economy. While the end of COVID-19 containment measures is boosting consumption, some analysts warn a recent series of price hikes for daily necessities could also hit spending.
Ueda will chair its first policy meeting on April 27-28, when the board releases its new quarterly growth forecast and price forecast extending through fiscal 2025.
Markets are focused on whether the board anticipates inflation to accelerate, or even hit 2% inflation in fiscal years 2024 and 2025.
Under current projections, the BOJ expects core consumer inflation to hit 1.6% in the current financial year starting in April and accelerate to 1.8% next year.
Ueda served as a member of the BOJ’s board from 1998 to 2005, during which time the central bank introduced zero interest rates and then quantitative easing to combat deflation and economic stagnation.
