Photo/Illutration Kazuo Ueda, new governor of the Bank of Japan, speaks at a news conference in Tokyo on April 10. (Pool)

New Bank of Japan Governor Kazuo Ueda said he will stick for the time being to the ultra-loose monetary policy pushed by his predecessor over the past decade.

However, he signaled that the central bank will conduct a “comprehensible review” of such a longstanding policy. 

“Judging from the current economic and price conditions, it is appropriate to maintain the yield curve control,” Ueda, 71, told his inaugural news conference on April 10, referring to the BOJ policy of containing long-term interest rates through massive purchases of government bonds.

His remarks apparently dampened market expectations of an early policy change, sending the Japanese currency more than 1 yen lower against the dollar at one point.

Critics say the large-scale monetary easing policy, championed by former BOJ Governor Haruhiko Kuroda, has diminished the functions of bond markets and caused other adverse effects.

“A powerful monetary easing policy has continued for more than 20 years,” said Ueda, who took over from Kuroda on April 9. “We may as well comprehensively evaluate it and, with the objective of finding out how we should proceed from here, examine and review it.”

He said the BOJ’s Policy Board, which decides monetary policy, will discuss the issue.

Ueda said he will try to achieve a price stability target of  2 percent, a goal included in the BOJ’s joint statement with the government, “as soon as possible.” Still, he declined to set a specific time frame.

Ueda met with Prime Minister Fumio Kishida before the news conference on April 10.

“I agreed (with Kishida) that the joint statement is appropriate and there is no need to immediately review it,” he told reporters after the meeting.

The BOJ will hold its first monetary policy meeting on April 27-28 under its new leadership, which also includes deputy governors Shinichi Uchida and Ryozo Himino, who took office on March 20.

“We must normalize (monetary policy) when the time is ripe, after concluding that inflation will reach 2 percent on a sustainable basis,” Ueda said. “If it is difficult, we must explore a more sustainable monetary-easing framework, paying consideration to its side effects.”

Ueda is the first private-sector economist appointed as BOJ governor after World War II.

Some analysts say how effectively the BOJ will communicate and work with the government and the ruling coalition will be a challenge for Ueda and his deputies.

“It is no problem if the BOJ and the government are in complete agreement,” said Yasunari Ueno of Mizuho Securities Co. “But how to coordinate views, including through behind-the-scenes talks, will be a challenge for the new leadership when there are discrepancies.”

A change in monetary policy will affect costs to service outstanding government debt as well as plans to issue new government bonds.

It is unknown whether Ueda has a network of connections with politicians and bureaucrats or whether he is a skilled negotiator. 

Uchida, 60, a former BOJ executive director, and Himino, 62, a former commissioner of the Financial Services Agency, are not adept at dealing with politicians, either, according to an economist at a securities house.

“There is a possibility that the three of them will think only in their heads and rush to reach a conclusion without understanding the atmosphere in Nagatacho,” a senior BOJ official said, referring to the Tokyo district that serves as the nation’s political power center.

However, Mari Iwashita of Daiwa Securities Co. said Ueda’s background as an independent economist should be an asset rather than a liability.

“At times, the BOJ has tried to accommodate the government’s wishes without being asked,” she said. “Ueda, as an academic, must make policy judgments that are consistent with the BOJ’s Outlook for Economic Activity and Prices report. That will become his strength.”

(This article was compiled from reports by Shinya Tokushima, Yuki Kubota, Kyosuke Yamamoto and Kuniaki Nishio.)

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