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BOJ head nominee Ueda to speak in upper house Feb. 27
afternoon
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Deputy governor nominees to appear in upper house Feb. 28
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Nominees' lower house hearing to be held on Feb. 24
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Analysts divided on how soon BOJ could phase out YCC
(Adds graphic on Japan's yield and inflation moves)
By Tetsushi Kajimoto and Leika Kihara
TOKYO, Feb 21 (Reuters) - Incoming Bank of Japan (BOJ)
Governor Kazuo Ueda will speak in parliament on Friday and next
Monday, as the central bank's yield cap comes under renewed
attack by markets betting on a near-term interest rate hike.
The remarks by Ueda, an academic and former BOJ board
member, will be closely watched by markets for clues on how soon
the central bank could end its bond yield control policy.
Long-term interest rates rose on prospects of a policy tweak
with the yield on the 10-year bond yield briefly
touching 0.505% on Tuesday, breaching the BOJ's 0.5% cap to
reach the highest level since Jan. 18.
The market's renewed attack on the BOJ's yield cap may
complicate Ueda's task of steering a smooth exit from ultra-low
rates, some analysts say. Ueda will take over from incumbent
Governor Haruhiko Kuroda when his term ends in April.
The upper house of parliament will hold its confirmation
hearing for Ueda, the government's nominee for central bank
governor, on Feb. 27, a ruling party lawmaker said on Tuesday.
The hearing will begin at 1:10 p.m. (0410GMT) and last for
nearly four hours.
The deputy governor nominees - former banking watchdog head
Ryozo Himino and BOJ executive Shinichi Uchida - will testify on
the following day, he said.
The upper house testimony will follow one to be held by the
lower house on Friday, which will offer financial markets a
first glimpse of Ueda's monetary policy stance.
The nominations need the approval of both chambers of the
Diet, which are effectively a done deal as the ruling coalition
holds solid majorities in both.
Under yield curve control (YCC), the BOJ guides short-term
interest rates at -0.1% and the 10-year bond yield around 0% as
part of efforts to sustainably achieve its 2% inflation target.
Under pressure from rising global interest rates, the BOJ
was forced to raise in December the implicit cap for its 10-year
yield target to 0.5% from 0.25% - a move that fuelled market
expectations of a near-term tweak to YCC.
Ryutaro Kono, chief Japan economist at BNP Paribas, expects
the BOJ to raise the yield cap to 0.75% or 1% as early as in
March - the last policy meeting to be chaired by Kuroda.
"If the BOJ does nothing in March, the new leadership under
Ueda will have to deal with a huge bond sell-off by global
investors," something the BOJ likely wants to avoid, he said.
Other analysts, however, are not sure whether the BOJ will
make any hasty moves given Japan's fragile economy.
"Some market players expect Kuroda to do something before
his term ends in April. But I don't expect an outgoing governor
to spur a surprise that could hit companies just as they close
their books at fiscal year-end in March," said Yasunari Ueno,
chief market economist at Mizuho Securities.
"Ueda also won't rush in exiting ultra-loose policy," as the
recent cost-push inflation is unsustainable, he said.
Analysts polled by Reuters expect data due on Friday to show
Japan's core consumer inflation hit a fresh 41-year high of 4.2%
in January.
But the BOJ expects inflation to slow below 2% later this
year as the impact of rising raw material costs fade. Kuroda has
said the central bank must maintain ultra-easy policy until the
rise in inflation is accompanied by higher wage growth.
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The BOJ’s YCC faces a reckoning ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Tetsushi Kajimoto and Leika Kihara; Editing by
Chang-Ran Kim & Shri Navaratnam)
