- Ueda played a key role in the BOJ’s first adoption of forward guidance
- As a pragmatic academic, Ueda was branded neither a dove nor a hawk
- Ueda prefers a data-driven approach to politics
- Calls for maintaining ultra-loose policy but skeptical of YCC
- Ueda will become BOJ chief on April 9, chairman of the first session on April 27-28
TOKYO, Feb 14 (Reuters) – Kazuo Ueda – Tokyo’s nominee for the next Bank of Japan governor – is a soft-spoken academic with a PhD from the Massachusetts Institute of Technology. He is a pragmatist who knows how to turn political ideas into reality.
Unlike incumbent Governor Haruhiko Kuroda, who came with a clear mandate to tackle deflation with massive stimulus, Ueda faces the tricky task of phasing out his predecessor’s radical and complicated policy framework without derailing a fragile economic recovery.
His academic credentials show he’s fit for the job. At MIT he studied economics with Stanley Fischer, whose students include former Federal Reserve Chairman Ben Bernanke and former European Central Bank President Mario Draghi.
As the first post-war BOJ governor to come out of academia, the 71-year-old also brings a wealth of experience to help guide Japan’s economy through rough waters, including during his tenure on the central bank’s nine-member board from 1998 to 2005.
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One of the tools he introduced in 1999 to combat a banking crisis and then debilitating deflation was forward guidance, in which central banks explicitly communicate their future interest rate intentions as a way of influencing spending and investment behaviour.
People who know him say that Ueda is a pragmatic politician-type academic who can flexibly adjust his views on monetary policy, making it difficult to brand him as either a hawk or a dove. He is more of a good listener and consensus builder than a leader with a clear opinion on the direction of monetary policy, they say.
“His style is to discuss monetary policy based on facts and evidence,” said Tetsuya Inoue, who was Ueda’s staff secretary when he was a board member of the central bank.
“He will not rely on a single model because he knows that economic and price developments are very complex. Rather, he uses economic theories as tools to shape politics flexibly.”
A fan of the Tokyo Yakult Swallows baseball team who enjoys drinking with colleagues and former schoolmates, Ueda is described by staff as approachable and outgoing, as well as an astute theorist who favors empirical analysis and data.
Even after his retirement as a board member, he remained close to the BOJ. Many of the students he taught at the prestigious Tokyo University now work at the bank.
As an adviser to a BOJ-affiliated think tank, he was a frequent speaker on its international panels and was among a handful of academics approached by central bank executives for policy proposals.
“He is always calm and never loses his temper. He’s great at finding the middle ground and won’t get in each other’s way unless absolutely necessary,” said a former BOJ official who worked at the bank when Ueda was a board member.
Like Kuroda, Ueda understands the dangers of deflation and the difficulty of breaking through Japan’s entrenched deflationary mindset, entrenched in decades of falling or flat price growth.
In a column published in July, Ueda warned against raising rates prematurely in response to costly inflation – a sign he would be in no rush to tighten monetary policy.
But he also pointed to the difficulty of maintaining yield curve control (YCC) when inflation rises and the policy’s potential flaws, suggesting that YCC’s days may be numbered.
In a book published in 2005, Ueda expressed skepticism about the impact of massive asset purchases and warned of the difficulty of influencing public perception through monetary policy – views that contradict Kuroda’s.
“At some point in the future, the BOJ will need to take a close look at the exceptional monetary policy environment that has lasted longer than many anticipated,” Ueda wrote in the column.
Jesper Koll, a veteran director at Tokyo-based Monex Group who had close ties to Ueda as a veteran observer of Japan, expects him to tread cautiously but not shy away from change.
“I can guarantee you that he’s not interested in any form of quick wins, nor is he under any pressure,” Koll said. “If the facts change, I’ll change my mind. This is Ueda. He is a man of science. He is not a man of dogmatics.”
Pending parliamentary approval, Ueda will take over as the BOJ’s top post on April 9 and chair its first policy meeting on April 27-28.
Reporting by Leika Kihara; Additional reporting by Tetsushi Kajimoto, Yoshifumi Takemoto, Kaori Kaneko and Kevin Buckland; Editing by Sam Holmes
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