Ueda Confirmation Hearings Get Underway Today

PM Kishida’s nominee to succeed outgoing BoJ Governor Kuroda, Kazuo Ueda, will appear in front of the lower house of the Japanese parliament today, with his nomination hearing getting underway at 09:30 Tokyo (00:30 London). The ruling coalition’s majority in both houses of parliament essentially guarantees confirmation of the nomination.

• Still, global market watchers and participants will take particular interest in the appearance given the well-documented adjustments to the BoJ’s YCC settings, as well as the continued test of the BoJ’s will by the market, which triggered some more subtle tweaks to the mechanisms that the Bank uses to defend its YCC parameters.
• The majority of BoJ watchers expect some form of further hawkish move from the BoJ by the end of July (per the latest BBG survey), while some have even suggested that Kuroda could further adjust the Bank’s YCC settings in his final meeting as Governor (which concludes on 10 March), arguing that such a move would smooth the handover to Ueda (assuming that such a tweak would allow 10-Year JGB yields to trade closer to perceived fair value, avoiding an immediate test of the new settings).
• This will be Ueda’s first round of meaningful comments since he was nominated by Kishida.
• Ueda is seen as a middle ground candidate (not too dovish, not too hawks) with the government touting his communication skills. He has previously pushed back against the idea of swift policy tightening, while also highlighting some of the negatives that surround YCC and prolonged ultra-loose policy settings. He has also provided mixed comments re: the potential for a switch to the 5-Year JGB point re: YCC.
• A reminder that there are expectations for the government and BoJ to discuss a loosening of the inflation accord struck between the two at an early point in the post-Kuroda era.
• The current BoJ board has placed focus on stimulating wage growth in a bid to generate demand-pull, not cost-push, inflation, although the shift higher in CPI and aggressive tightening across the major global central banks has pressured the BoJ into the aforementioned YCC tweaks. Ueda will be tasked with providing some form of policy normalisation (a move away from the current ultra-loose settings, at a minimum).
• The nominations for the BoJ Deputy Governor roles, Uchida and Himino, will appear in the afternoon. Uchida will likely play a key part in shaping the future of Japanese monetary policy.