Photo/Illutration Kazuo Ueda, the government’s nominee for the next Bank of Japan governor, speaks at the Lower House Rules and Administration Committee on Feb. 24. (Koichi Ueda)

The government’s pick to head the Bank of Japan pledged on Feb. 24 that he would stay the course in keeping the ultra-loose monetary policy in place over the past decade.

However, economist Kazuo Ueda added that he would also consider an assessment of the side effects of that policy.

Ueda, 71, appeared at the Lower House Rules and Administration Committee to present his views on what he would do if approved to replace current BOJ Governor Haruhiko Kuroda. 

Saying the BOJ’s current monetary policy was “appropriate,” Ueda added, “I intend to continue with a loose monetary policy to support the economy and create an environment that will allow companies to raise their wages.”

He said that the ultra-loose monetary policy in place under Kuroda had “contributed to improvement in corporate profits and employment and created circumstances that were not deflationary.”

But he added that the current surge in consumer prices was not due to strong demand and that “more time will be needed to reach the goal of a stable 2-percent inflation rate.”

The government and the BOJ in 2013 released a joint statement that called for achieving a year-on-year inflation rate of 2 percent “as soon as possible.”

Ueda said there was no need to immediately revise that joint statement.

At the same time, the BOJ nominee also acknowledged that various side effects had emerged as a result of the decade of an ultra-loose monetary policy.

That policy led to a historic weakening of the yen against the dollar last year and experts have said the long duration of the policy has led to worsening of market functions.

Regarding an assessment of the effects, both positive and negative, of the loose monetary policy, Ueda said, “After holding discussions with other Policy Board members, I would like to conduct an assessment if the need emerges.”

One measure taken by the BOJ to keep interest rates low is the yield curve control (YCC) target. But in December, the BOJ partially widened the target band for interest rates and that led to market speculation of further changes to the target.

While Ueda said various possibilities regarding the target existed for the future, he refrained from going into detail because of the risk that could lead to an unexpected situation.

He only said, “We may consider revising the direction of the YCC to a more normal one if the consumer price trend improves.”

The BOJ has also propped up stock prices through its purchases of financial assets called exchange-traded funds (ETF).

Admitting that the BOJ had made a large volume of ETF purchases, Ueda said how to deal with those assets would be a major issue for the future.

However, he only said a specific explanation would be made about selling off the ETF when the central bank came closer to an exit strategy from its loose monetary policy.

The government’s two nominees for vice governor--Ryozo Himino, 62, a former commissioner of the Financial Services Agency, and Shinichi Uchida, 60, a BOJ board member--also appeared before the Lower House Rules and Administration Committee on Feb. 24.

All three will appear before the Upper House Rules and Administration Committee next week.

The consent of the two Diet chambers is needed before the government can formally appoint the new governor and vice governors.

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