Japan to appoint Kazuo Ueda as next BOJ governor – sources

Article content

Japan’s government is likely to appoint Kazuo Ueda, an academic and a former member of the central bank’s policy board, as the Bank of Japan’s next governor, two government officials with knowledge of the matter told Reuters.

Here are reactions:

Article content

MITSUSHIGE AKINO, DIRECTOR, ICHIYOSHI ASSET MANAGEMENT, TOKYO

“It appears that they had no choice but to choose him after being rejected by Mr. (Masayoshi) Amamiya and Mr. (Hiroshi)Nakaso. Those (monetary policy) professionals are well aware how difficult it will be to normalize the current policy. This shows how tough the normalization process can be.”

Article content

NICHOLAS SMITH, JAPAN STRATEGIST, CLSA, TOKYO:

“The market seems to believe that he’s more hawkish, hence the strengthening in the yen. The biggest point seems to be that Amamiya turned down the job. Now, we knew that the front runners were viewing this as a poisoned chalice.”

“It’s probably best to look at this as an academic who’s prepared to do things differently than they’ve done in the past. So one has to look at him as innovation….And it’s going to take some pretty innovative thinking to handle this and not drop the ball.”

MASAYUKI KICHIKAWA, CHIEF MACRO STRATEGIST, SUMITOMO MITSUI ASSET MANAGEMENT, TOKYO:

“This is a surprise…In terms of monetary policy, probably nobody has a very good sense of his way of thinking, but he’s very strong in international economics, including foreign-exchange rates.”

Article content

“Mr. Ueda has no direct linkage with Abenomics, so compared with Mr. Nakaso and Mr. Amamiya, he is more neutral. That’s why the market reacted the way it did. Mr. Ueda could consider a wide range of options about how to alter the framework for monetary policy.”

“At the very least, people consider that Mr. Ueda is different from Mr. Kuroda, Mr. Amamiya and Mr. Nakaso. It would need that the framework for BOJ policy could change a little bit more, or a little more quickly, than in the case of Mr. Amamiya or Mr. Nakaso.”

SIMON HARVEY, HEAD OF FX ANALYSIS, MONEX EUROPE, UK:

“It’s just a reversal of previous concerns that Amamiya was going to be the BoJ governor and now we are seeing signs that the new governor might actually take a bit different perspective on monetary policy, or at least, it might not necessarily be hawkish but it is a complete new slate, and that’s emboldening expectations again that, potentially, we will see Kuroda’s ultra-dovish stance unwound in the medium term.”

Article content

“At the moment, this is primarily just fast money sloshing around and retail investors as well. We don’t necessarily see this as a huge move that it could have been really and truly for dollar-JPY to move on a more structural basis.”

JAMES MALCOLM, HEAD OF FX STRATEGY, UBS, LONDON:

“Ueda is actually an academic economist. Anyone who has studied Japan academically will be aware of him… He’s a little bit of a supply-sider. But he’s also been not terribly positive on Abenomics from the start. From about 2016 he was saying that it had basically failed and the super large monetary easing was causing problems with the bond market, and these sorts of things.”

“It’s quite a surprise in terms of the way that the candidates have have lined up. I don’t think it will keep anyone happy in the market. They’re all completely qualified in and of themselves, but it’s a strange mix…I’m surprised that dollar yen is not 129 already. Maybe that’s just a result of people not knowing who these characters are. To me, this is as hawkish an outcome as having Mr. Yamaguchi in the governor role.”

Article content

CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE:

“A surprise in terms of the nominees list that is reported by local media.”

“At the first glance, based on what can be gathered about the nominees, the two deputy nominees may lean to the neutral-to-slight hawkish side of things.”

“Little is known about Governor-nominee Kazuo Ueda, a professor and former BoJ board member. There is probably a lack of clarity on Ueda’s policy leanings at the moment, but at least it is clear that Amamiya (who is seen as a dove) is out. That removes one of the headwinds for the yen.”

“The knee-jerk reaction in yen appreciation is more of a reaction to Amamiya being out of the race.”

TAKESHI MINAMI, CHIEF ECONOMIST, NORINCHUKIN RESEARCH INSTITUTE, TOKYO:

Article content

“The issue will be how to take the first step toward policy normalization. (…) Under the current joint statement, achieving 2% inflation can’t be expected, leaving no choice but to continue with the current policy.”

“If Prime Minister Kishida entrust policy normalization as the first step, then it’ll be necessary to slightly change the joint statement” for the new governor.”

“He’s flexible. Originally, he’s a scholar so he’ll think what kind of policy is desirable depending on the situation.”

SHOTARO KUGO, ECONOMIST, DAIWA INSTITUTE OF RESEARCH, TOKYO:

“It was a surprising choice, but Prof. Ueda is well-known in the monetary policy circle so it’s not completely ‘who’s this?’ situation.”

“Ueda is well-versed in interest rates. And he also has an experience of the communication struggle over the BOJ’s zero-interest rate policy when he was a board member. Being a theorist and practitioner at the same time would make him well positioned going forward as the BOJ enters a difficult period of normalization.”

Article content

“None of the three governor/deputy governors appear to have the (dovish) reflationist idea. I can see the government’s intention to renew the monetary policy direction from the previous one.”

TAKAYUKI MIYAJIMA, SENIOR ECONOMIST, SONY FINANCIAL GROUP, TOKYO:

“This is a surprise move. I think the new team (with Ueda as the governor along with deputy governor Uchida) means that they will redesign the BOJ’s monetary policy, (and) not maintain the current policy. That is why the 10-year JGB yield hit 0.5%.”

TSUYOSHI UENO, SENIOR ECONOMIST, NLI RESEARCH INSTITUTE, TOKYO:

“This was quite a surprise, he wasn’t coming up in the predictions at all. But he’s an economist who has some past ties to the BOJ and he’s unlikely to be very hawkish, so normalization will be slow at best.”

Article content

“I think there was a real balance here between him and the two candidates for deputy who have been named – Uchida is a real BOJ insider and then Himino has a good international orientation.”

TATSUNORI KAWAI, CHIEF STRATEGIST, AUKABUCOM SECURITIES:

“This is unexpected as the market was expecing (Masayoshi) Amamiya to be nominated. Amamiya has been considered as a person with conservative policies and strategies, and such a view has been factored into the market prices as of today.”

“But now we don’t know what kind of person he (Ueda) is. Market players don’t like such uncertainties and they are likely to take sidelines on Monday morning.”

STUART COLE, HEAD MACRO ECONOMIST, EQUITI CAPITAL, UK

“The key thing for me is that Amamiya appears to have turned down the offer to have been made Governor of the Bank of Japan. He has been at the BoJ a long time and was considered a key supporter of Kuroda and his policies, that is very loose monetary policy and a weak JPY. So with him gone, the reaction we are seeing is probably one of relief that the current weak-JPY policy may be coming to an end.”

Article content

“However, the apparent choice for Governor now – Ueda – is somewhat of a wild card for the markets. He has been a policy-maker at the BoJ in past, from 1998-2005, but what his views are on the current monetary policy stance are mostly unknown. So we could yet be in for a volatile ride in the JPY if he turns out to be singing from the same hymn sheet as Kuroda.”

JANE FOLEY, HEAD OF FX STRATEGY, RABOBANK, LONDON:

“There are various papers published by him on the BIS (website) going back to 2005, but they’re quite few and far between and I think he was not top of the list.

“What I would imagine, is that because he has been on board of the Bank of Japan, that he is relatively dovish, because just about everyone that’s been on the board of the Bank of Japan has been dovish for a long time. Right now, to be honest, we can only assume that. We need some commentary from him. I have been of the view for a while that probably – whoever takes over as the governor – there may not be any huge initial change in so far as everyone is trying to nurture inflation into place, everyone is waiting for the spring wage talks and the initial indications are a little bit positive, but perhaps not enough for a huge turnaround.”

Article content

“Even if Kuroda remained in control, we could get an adjustment in yield-curve control this year anyway.”

HIROAKI MUTO, ECONOMIST, SUMITOMO LIFE INSURANCE CO: “Ueda seems a very different type from Kuroda, in terms of being an academic who would plainly conduct policy based on actual economic fundamentals and value conversations with the market. But he may not be super hawkish type either, so the upcoming (normalization) would take place very slowly, no matter how the new leadership revises the joint statement (with the government).” (Reporting by Kiyoshi Takenaka, Kevin Buckland, Harry Robertson, Daniel Leussink, Junko Fujita, Elaine Lies, Mariko Katsumura, Amanda Cooper, Kantaro Komiya and Bansari Mayur Kamdar; Editing by Rashmi Aich)