The Bank of Japan’s (BOJ) yield curve control and negative interest rates are appropriate amid the current economy, new BOJ Governor Kazuo Ueda said, signaling any significant changes to its monetary policy framework might be unlikely for the time being.
Speaking at his inaugural news conference as governor, Ueda also said he is open to the idea of a policy review from a longer-term standpoint, although he would like to discuss it with other board members before any decision.
“Given the current economic, price and financial conditions, I think it’s appropriate to keep up the current yield curve control,” he said.
Photo: Reuters
While many economists expected some form of change from the new governor by June in a Bloomberg survey published early last month, for now, Ueda seemed to suggest that a shift is not necessary.
Still, he kept his options open by saying there is a need to closely watch developments, and that he would carefully explain should the BOJ make any changes to policy.
The yen retreated as Ueda spoke and Japanese bond futures ticked higher, suggesting his comments undermined bets for a significant policy move at this month’s meeting.
Japanese Prime Minister Fumio Kishida picked Ueda as the first new BOJ chief in a decade, meaning the first academic to take over the central bank’s top position also inherited a massive easing program that saw US$11.7 trillion of spending under former governor Haruhiko Kuroda.
During his confirmation process in parliament following his nomination, Ueda had already indicated he would continue with monetary easing for now. That has brought greater market focus to how much Ueda is concerned about the growing side effects of massive easing and the deteriorating functioning of financial markets.
Earlier in the evening, Ueda also met with Kishida and they agreed there is no need to revise the central bank’s joint agreement with the government for now.
“As a result of appropriate policy from both the BOJ and the government we’re now in a situation where we’re not in a state of deflation,” Ueda told reporters in Tokyo yesterday after meeting with Kishida at the prime minister’s office. “We agreed the thinking behind the joint statement is appropriate, and there’s no need for an immediate review.”
The 2013 accord between the government and the central bank states the BOJ would seek to hit its inflation target as early as possible.
At the news conference, Ueda said he wants to achieve the 2 percent inflation target within his five-year term and would do his utmost to ensure stability of prices as well as the financial system.
The 71-year old Ueda is scheduled to host his first policy meeting on April 27 and 28.
“I have studied monetary policy for many years and been involved in policy operation and central banking in practical manners. Using this experience, I’d like to do my best to finish achieving the mission of price stability,” he said in the news conference also attended by his deputy governors Shinichi Uchida and Ryozo Himino.
“We’ve been shown that even if the governor changes, it doesn’t mean that continued easing will change immediately,” Daiwa Securities Co chief market economist Mari Iwashita said. “Once again we’re seeing that the central bank is a place that values continuity.”
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