Photo/Illutration Kazuo Ueda, who was picked by the government as the next governor of the Bank of Japan, in 2016 (Asahi Shimbun file photo)

The likely next Bank of Japan governor is described as flexible, realistic, well-balanced and not prone to follow a single monetary policy theory.

The government is set to nominate Kazuo Ueda, an economist and a former member of the central bank’s Policy Board, to lead the BOJ during a Diet session on Feb. 14.

If approved, Ueda, 71, will likely put the nation’s monetary policy back on a normal course in the medium and long term, according to some analysts. That would end the ultra-loose monetary policy the central bank has pursued since April 2013.

“You cannot group Ueda in a single category, such as a reflationist who backs monetary easing or a reformist pushing for structural reform,” said Tetsuya Inoue, a senior researcher with Nomura Research Institute and a former central bank employee.

Inoue, who supported Ueda as a staff member when he served on the bank’s Policy Board for seven years from 1998, noted that economists generally tend to decide monetary policy based on a theory they hold.

“But Ueda made decisions after listening to opinions different from his,” Inoue said of Ueda’s tenure on the Policy Board.

A former senior official with the BOJ who is familiar with Ueda gave a similar view.

“Ueda is not entrenched in an ultra-easy policy promoted under Abenomics, and he makes policy decisions in an orthodox manner based on the state of economy,” the former official said.

Japan is experiencing a sharp drop in the value of its currency and weakening markets, an apparent byproduct of the continuing monetary easing policy that began under the Shinzo Abe administration.

After reports emerged on Feb. 10 that Ueda, a former professor of economics at the University of Tokyo, was the government’s choice, he told reporters that the BOJ’s current monetary policy is “appropriate” and “needs to continue.”

But he added, “I am fully aware of the numerous challenges ahead.”

Some former BOJ officials, who said Ueda maps out policy based on a vision and logic, speculated that Ueda, as new governor, may change the central bank’s long-term interest rate policy because “it does not make sense.”

Takahide Kiuchi, a former member of the BOJ Policy Board who now serves as executive economist at Nomura Research Institute, said Ueda’s stance on monetary policy is different from that of the current governor, Haruhiko Kuroda, who assumed the post in 2013 under the Abe administration.

Kuroda, 78, is stepping down in April after two five-year terms.

“I believe that Ueda will cautiously and slowly review the framework for monetary easing and prepare a return of monetary policy to a normal course,” Kiuchi said.

However, that does not necessarily mean the next BOJ governor is in a rush for a course correction.

One episode that backs this view was when Ueda attended the central bank’s monetary policy meeting in August 2000.

At the time, the Japanese economy was assessed as stuck in a mild deflationary phase in the aftermath of the bursting of the asset-inflated economic bubble.

At the meeting, Ueda voted against a proposal to shift from the zero-interest-rate policy and raise interest rates.

The minutes of that meeting showed that while many Policy Board members were in favor of a rate hike, Ueda expressed caution toward the move.

“The economy should be performing better to a certain degree” as a condition for a rate increase, he said, adding that he hoped his concern would prove unfounded.

The board decided to lift the zero-interest-rate policy at the meeting.

But the economy worsened after that, leading to criticism that change was premature.

The central bank introduced quantitative easing the following year, putting monetary policy back into the direction of ultra-low interest rates to stimulate the stagnant economy.

(This article was written by Takehiro Tomoda and Shinya Tokushima.)

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