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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

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Japan’s new central bank chief takes office amid global threats.

New Bank of Japan Governor Kazuo Ueda arrives at the bank headquarters on his first day at work in T... New Bank of Japan Governor Kazuo Ueda arrives at the bank headquarters on his first day at work in Tokyo, Japan April 10, 2023/ Morishita Yusuke
New Bank of Japan Governor Kazuo Ueda arrives at the bank headquarters on his first day at work in T... New Bank of Japan Governor Kazuo Ueda arrives at the bank headquarters on his first day at work in Tokyo, Japan April 10, 2023/ Morishita Yusuke

Slowing global growth makes it difficult for Japan’s new central bank governor Kazuo Ueda to phase down his predecessor’s aggressive monetary stimulus by raising inflation and wages.

Haruhiko Kuroda’s second, five-year tenure ended Saturday, and the 71-year-old professor took over on Sunday. On Monday at 1015 GMT, Ueda and his deputy governors, Shinichi Uchida and Ryozo Himino, will conduct a news conference.

Ueda’s bond yield control strategy has been criticized for distorting markets and damaging bank profitability. As a result, investors will be watching for signs of its eventual abolition.

While Prime Minister Fumio Kishida has not publicly requested monetary policy changes, the chairman of his party’s coalition partner urged Ueda to go slowly.

“I hope the BOJ’s price objective and economic development can be accomplished in a reasonable way, rather than through dramatic adjustments,” Komeito party head Natsuo Yamaguchi told reporters on Monday regarding Ueda.

At February’s parliamentary confirmation hearings, Ueda highlighted the necessity to maintain an ultra-easy policy to support the BOJ’s 2% inflation objective underpinned by wage growth.

With inflation exceeding the objective, many experts anticipate the BOJ to adjust or eliminate yield curve control (YCC), a policy combining a 0.1% target for short-term interest rates and a 0% cap for 10-year bond yields, this quarter.

“The rising side-effects are an indication the policy effect (of YCC) is making its way through the economy,” said former BOJ deputy governor Hiroshi Nakaso in an interview with Nikkei.

He stated the BOJ’s new administration would likely alter or eliminate YCC at the right time.

Japan’s long-stagnant inflation and wage growth are beginning to alter. However, core consumer inflation stays above 3% as more companies raise prices to offset rising raw material costs.

In yearly labor discussions, big employers have proposed salary raises of over 4%, the strongest rate in three decades, to compensate consumers for rising living costs.

During his farewell briefing as governor on Friday, Kuroda said Japan was getting closer to 2% inflation since the public’s long-held belief that prices won’t rise was changing.

Japan’s export-dependent economy faces U.S. recession concerns. In addition, while eliminating COVID-19 limits boost consumption, economists caution that recent price spikes for essentials will damage expenditure.

Ueda will chair his first policy meeting on April 27-28, when the board releases quarterly growth and pricing predictions through fiscal 2025.

Investors are focused on whether the board will anticipate inflation increasing toward or reaching 2% in fiscal 2024 and 2025.

The BOJ predicts core consumer inflation to reach 1.6% in the current fiscal year that began in April and 1.8% the following year.

From 1998 until 2005, Ueda sat on the BOJ board, which used zero interest rates and quantitative easing to fight deflation and economic stagnation.


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