BOJ head nominee Ueda to speak at Japan’s lower house on Feb 24

BOJ head nominee Ueda to speak at Japan’s lower house on Feb 24

© Reuters. FILE PHOTO: Kazuo Ueda, a former member of the BOJ’s policy board, speaks to media in Tokyo, Japan February 10, 2023, in this photo taken by Kyodo. Kyodo via REUTERS /File Photo

By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) -Kazuo Ueda, the government’s nominee to become the next Bank of Japan (BOJ) governor, will speak at a confirmation hearing at the lower house of parliament on Feb. 24, a ruling party official said on Thursday.

Markets will monitor the hearing for clues on how the 71-year-old academic could steer the central bank out its prolonged ultra-loose monetary policy.

The lower house will conduct the hearing on Ueda’s nomination in the morning, Shunichi Yamaguchi, head of the lower house steering committee, told reporters on Thursday.

The government’s deputy governor nominees – former banking watchdog head Ryozo Himino and Bank of Japan executive Shinichi Uchida – will also testify in the afternoon after Ueda, he said.

A steering committee for the upper house failed to decide on the date of its chamber’s confirmation hearings, the committee’s chief told reporters after a meeting on Thursday.

The government named Ueda to be next BOJ governor on Tuesday, a surprise choice that could increase the chance of an end to its unpopular yield-control policy.

Japan’s banking lobby head Junichi Hanzawa said he expected the BOJ to exit the ultra-loose policy at some point, which would increase market volatility.

“To reduce such risks, we hope the BOJ, under the new leadership, will make appropriate decisions that ensure markets function healthily through sufficient dialogue such as forward guidance,” Hanzawa, chairman the Japanese Bankers Association, told a news conference on Thursday.

The nominations need the approval of both chambers of the Diet, which is effectively a done deal since the ruling coalition holds solid majorities in both chambers.

The steering committees of both chambers demanded an investigation by the government on whether officials may have leaked to media the names of the BOJ nominees before they were presented to parliament.

An investigation by the government found there were no media leaks, though the wrangling was partly behind the upper house committee’s failure to decide on the date of the hearing.

A former BOJ board member, Ueda will succeed incumbent Haruhiko Kuroda, whose second, five-year term ends on April 8.

With inflation exceeding the BOJ’s 2% target, Ueda faces the delicate task of phasing out its yield control policy that has drawn public criticism for distorting market function and crushing bank margins.

In a column issued last July, Ueda warned against raising rates prematurely but said the BOJ must eventually consider how to exit from its ultra-loose policy.

Under yield curve control (YCC), the BOJ guides short-term interest rates at -0.1% and caps the 10-year bond yield at 0.5% as part of efforts to sustainably hit its 2% inflation target.

Underscoring the difficulty of maintaining YCC, the 10-year bond yield remained stuck at the BOJ’s 0.5% cap on Thursday on market bets the central bank will eventually abandon the ceiling and allow long-term rates to rise more.

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