The shock news that Kazuo Ueda will likely be chosen to head the Bank of Japan has led investors to probe the policy stance of the economist and former policy board member.
(Bloomberg) — The shock news that Kazuo Ueda will likely be chosen to head the Bank of Japan has led investors to probe the policy stance of the economist and former policy board member.
The yen surged after reports on Friday that Prime Minister Fumio Kishida will pick Ueda as governor as traders initially interpreted the choice as a more hawkish option to incumbent Haruhiko Kuroda. The gains were trimmed after Ueda spoke to reporters and said the BOJ’s stimulus should stay in place.
Some of the biggest Wall Street banks, including Morgan Stanley and JPMorgan Chase & Co., have said the reports are almost certainly correct because they were published almost simultaneously by varying outlets. They have been poring over Ueda’s statements to gauge how hawkish or dovish he is.
Here’s what analysts are saying about the potential new BOJ governor:
ANALYST COMMENTARY
JPMorgan (Rie Nishihara, Yong Guo)
- Ueda is “neither dovish or hawkish” and is “well-versed in economic theory and practice” with an international perspective
- Expects that he will manage policy based on “solid economic theory” that is neutral and data-driven, like the US Federal Reserve Board
- Believes that the current monetary policy could be “organized in a way that is easy to understand globally”
- Expects the market to “take comfort” from the news, given that Ueda’s most recent article in Nikkei suggested a dovish stance as he warned against raising rates too early
Morgan Stanley MUFG (Takeshi Yamaguchi)
- Professor Ueda is “a suitable choice as BOJ Governor”
- “BOJ’s existing stance of emphasizing wage growth will remain unchanged,” based on Ueda’s Nikkei article from July 2022
- Ueda’s comments seem to support the firm’s existing view that BOJ will “likely significantly revise or abolish the YCC policy in 2023” but bar remains high for BOJ to hike rates this year
- Says upcoming Diet hearings are important, especially regarding Ueda’s views on side effects of Japan’s negative interest-rate policy
Goldman Sachs (Naohiko Baba, Yuriko Tanaka, Tomohiro Ota)
- Ueda has a “balanced view,” rather than being “biased significantly as a dove or a hawk”
- While Ueda said Friday that current BOJ policy is appropriate and monetary easing should continue, Ueda also mentioned last year that BOJ should prepare an exit strategy and that the current policy framework requires serious examination
- Ueda wrote in his book that “the financial market infrastructure was partially damaged” and would take time to restore
Mizuho (Colin Asher)
- Expects Ueda to reflect more of the Board instead of being the main driver of policy, which would be similar to a shift at the ECB when Christine Lagarde replaced Mario Draghi
- Reported nominee for deputy Shinichi Uchida may be as dovish as current Deputy Governor Masayoshi Amamiya, while Ryozo Himino is seen more hawkish than the incumbent, Masazumi Wakatabe
- Difficult for Ueda to be as “resolutely dovish” as Kuroda
- Expects Ueda to take an all-round view, with inflation and wages being key policy drivers
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