By Leika Kihara and Takahiko Wada
TOKYO, Feb 13 (Reuters) - The Bank of Japan's expected
next governor Kazuo Ueda likely won't rush to overhaul
ultra-loose policy and will instead let economic data guide the
exit timing, said Tetsuya Inoue, who was Ueda's staff secretary
when he was a central bank board member.
Markets are closely watching for hints on the policy stance
of Ueda, a 71-year-old academic who the government is likely to
appoint as successor to Governor Haruhiko Kuroda when his term
ends in April.
During his stint as BOJ board member from 1998 to 2005, Ueda
played a key role in introducing new monetary easing tools to
combat a domestic banking crisis and debilitating deflation.
Inoue, a senior researcher at Nomura Research Institute who
knows Ueda from his time as his staff secretary from 2000 to
2003, said he does not belong to any economic camp that could be
explicitly described as dovish or a hawkish.
"His style is to discuss monetary policy based on facts and
evidence," Inoue told Reuters in an interview on Monday.
"He won't rely on a single model because he knows that
economic and price developments are very complex. Rather, he
uses economic theories as tools to conduct policy flexibly."
In contrast to Kuroda, who deployed massive stimulus shortly
after becoming governor in 2013, Ueda likely won't rush into
overhauling policy as he will have time to gauge whether
inflation and wages will keep rising, Inoue said.
"Unlike Kuroda, Ueda won't immediately turn things around
after assuming the post. That's not his mandate," said Inoue.
"He'll likely let economic data guide policy decisions."
A holder of an economics PhD degree from the Massachusetts
Institute of Technology (MIT), Ueda helped the BOJ introduce
forward guidance in 1999 - a little known concept back then in
which central banks commit to keeping ultra-low interest rates
in hope of curbing rises in longer-term rates.
Since then, forward guidance has become widely used among
global central banks.
If he were to become governor, Ueda could introduce a new
monetary policy framework that could include a revamped type of
forward guidance, Inoue said.
In a book published in 2005 reflecting on the BOJ's battle
with deflation, Ueda said Japan's then crippled banking system
had hampered the stimulus effects of ultra-low interest rates.
After the 2008 collapse of Lehman Brothers, global
policymakers have become more aware of the damage banking-sector
problems could inflict on their economies, Inoue said.
"If he were to become governor, Ueda will likely put
emphasis on maintaining financial system stability," he added.
(Reporting by Leika Kihara and Takahiko Wada; Editing by Sam
Holmes)
Messaging: leika.kihara.reuters.com@reuters.net))
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