The news that Kazuo Ueda may take over as Bank of Japan governor sent USD/JPY down more than 100 points on February 10, but then his dovish remarks caused USD/JPY to recover most of the losses in the day. who is he? Why did it cause such a big market reaction? This article will introduce the biography of Kazuo Ueda and his recent remarks.
Kazuo Ueda’s Biography and Economic Viewpoint
Ueda Kazuo (September 20, 1951 -), an economist at Kyoritsu Women’s University, an honorary professor at the University of Tokyo, specializing in economics and finance. Graduated from the Faculty of Science of the University of Tokyo and the Faculty of Economics of the University of Tokyo, under the tutelage of Uzawa Hirofumi (Mathematical Economics), Komiya Ryutaro (International Finance Theory) and Hamada Koichi (International Finance Theory).
1985-1987: Senior Research Officer, Institute of Fiscal and Monetary Affairs, Ministry of Finance.
1998-2005: Served as a member of the Bank of Japan’s policy committee, as a theoretical pillar of the policy committee, participated in the introduction of zero interest rates and quantitative easing.
Regarding Abenomics, he stated in 2016:
“Japan needs concrete programs to develop youth talent and effectively utilize core and non-core workers. The Abe government must go beyond simply focusing on alleviating the suffering of non-core workers and address inefficiencies in the core labor market.
Worse, the BoJ appears to be approaching its limits. It now holds more than a third of Japanese government bonds and expects to increase that to nearly half by the end of 2017. Market functioning has clearly deteriorated. It’s unclear how long the bank can continue buying Treasuries at the current pace. “
Understand the monetary policy framework of the Bank of Japan in one article, what are QQE and YCC?
On the issue of wage and price developments in the pandemic, he noted
“Developments in aggregate demand are critical to achieving the 2 per cent price stability target. It is difficult to predict how quickly wages are likely to rise in the future as this will depend on various factors such as the development of inflation expectations, inflation in the previous financial year To what extent is reflected in the outcome of wage negotiations between employers and workers each spring, as well as structural changes in the labor market. The BOJ will need to continue to carefully monitor wage and price developments.”
Kazuo Ueda makes dovish remarks
According to Japan’s NTV report, Ueda Kazuo said on February 10, 2023: “Japan’s current monetary policy is appropriate and needs to continue to ease the policy.” Asked about reports that he would be nominated to be the next governor, he said nothing had been decided; when asked how he would conduct policy if he were the head of the Bank of Japan, he said it would be logical It is important to make decisions and explain them clearly.
USD/JPY rebounded by more than 100 points to around 131 in the short term.
USD/JPY 1-hour chart
The author believes that before there is no official confirmation from the Japanese government, the yen may face the risk of sharp fluctuations. According to informed sources, the nomination of the Japanese government’s governor may be announced on February 14.
Japan has long been on an ultra-loose monetary policy, and markets were betting early on a policy reversal. Since the policy orientation of the next governor will be the top priority of the market, the emergence of a hawk may cause the yen to rise sharply, while the emergence of a dovish person may cause the yen to fall.
Investors should calm down and bet on the end of the easing or the continuation of the easing, which is not a small possibility. Bank of Japan policymakers worry that a rapid policy normalization could lead to a rapid fall in inflation below the target level or even deflation. How to keep inflation at the target level will be the key.
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