Japan expected to name Kazuo Ueda as next central bank head

Japan’s prime minister Fumio Kishida has chosen as the next central bank governor Kazuo Ueda, a respected monetary policy expert who has previously warned against an early exit from Japan’s ultra-loose policies, according to local media.

The government is set to name the 71-year-old former Bank of Japan board member who teaches economics at Kyoritsu Women’s University, the Nikkei newspaper, Kyodo News and state broadcaster NHK said on Friday.

The appointment would end weeks of speculation among global investors over the successor to Haruhiko Kuroda, who is due to step down in April after overseeing a decade of policies designed to keep interest rates at ultra-low levels by buying vast quantities of government bonds.

In December, Kuroda surprised markets with a tweak to the central bank’s policy of controlling yields on the 10-year Japanese government bond. That abrupt shift intensified market speculation over whether the BoJ was closer to a pivot away from its ultra-loose monetary stance than investors had previously assumed.

The selection of Ueda would signal a desire to appoint a technocrat to base the BoJ’s monetary policy decisions on economic rationale rather than politics.

Ueda could not be immediately reached for comment. A Japanese government spokesman declined to comment.

The change in leadership comes amid strong market pressure on the BoJ to abandon its aggressive monetary easing. Japan’s core inflation rate — which excludes volatile food prices — rose to a 41-year high of 4 per cent in December.

The yen strengthened within moments of reports of Ueda’s expected nomination in Japanese media, rising almost 1 per cent against the dollar to ¥130.47.

The currency quickly reversed coursed shortly afterwards, with foreign exchange traders in London saying the selection was so unexpected that the market would likely take some days to work out what Ueda’s appointment — if confirmed — would mean for the Japanese currency.

Benjamin Shatil, currency strategist at JPMorgan, said markets would want to work out how Ueda will differ in his policy biases from Kuroda.

“Any initial market moves may prove to be a flash in the pan as traders turn their attention back to the incoming data from Japan which is showing record wage growth and persistent price pressures,” Shatil added, noting that these dynamics were likely to be more important in determining how quickly an incoming governor would be able to unwind Kuroda’s legacy of accommodative policies.

One person close to Ueda said the former Tokyo University professor had at some point taught many who are now senior bureaucrats at both the BoJ and the finance ministry.

Ueda, he added, had been an important voice on monetary policy during the 1990s, when Japan was a pioneer in quantitative easing.

“He is thoughtful, he does not shoot from the hip. He is not someone that will be looking for big, quick wins,” the person said.