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Academic Ueda succeeds Kuroda
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Inflation, wages showing signs of change from prolonged
weakness
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Ueda to chair first BOJ policy meeting April 27-28
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Focus on BOJ's fresh quarterly projections due April 28
By Leika Kihara
TOKYO, April 10 (Reuters) - Japan's new central bank
governor Kazuo Ueda faces a bumpy road as slowing global growth
clouds prospects for a sustained pickup in inflation and wages,
a prerequisite for phasing out his predecessor's controversial
monetary stimulus.
The 71-year-old academic's term began on Sunday, succeeding
Haruhiko Kuroda, whose second, five-year term ended on Saturday.
Ueda and his two deputy governors, Shinichi Uchida and Ryozo
Himino, will hold a joint news conference at 1015 GMT on Monday.
Markets will be looking for clues on how soon Ueda could
phase out an unpopular bond yield control policy that has drawn
criticism for distorting markets and hurting bank margins.
In parliamentary confirmation hearings in February, Ueda has
stressed the need to keep ultra-easy policy to ensure Japan
sustainably achieves the BOJ's 2% inflation target backed by
wage growth.
But with inflation exceeding the target, many analysts
expect the BOJ to tweak or end yield curve control (YCC), a
policy combining a 0.1% target for short-term interest rate and
a 0% cap for the 10-year bond yield, as soon as this quarter.
"The increasing side-effects are a sign the policy effect
(of YCC) is working its way through the economy," former BOJ
deputy governor Hiroshi Nakaso was quoted as saying in an
interview with the Nikkei newspaper.
"When the appropriate timing comes, the BOJ's new leadership
will likely modify or abolish YCC," he said.
Japan's long-stagnant inflation and wage growth are showing
budding signs of change. After hitting a 41-year high of 4.2% in
January, core consumer inflation remains above 3% as more firms
hike prices in response to rising raw material costs.
To compensate households for the increase in living costs,
major firms have offered wage hikes of nearly 4% this year in
annual labour talks, the fastest pace in about three decades.
At his final briefing as governor on Friday, Kuroda said
Japan was moving closer to achieving sustained 2% inflation as
the public's long-held perception that prices won't rise, was
beginning to change.
But mounting U.S. recession fears are among headwinds for
Japan's export-reliant economy. While the end to COVID-19 curbs
is propping up consumption, some analysts warn a recent slew of
price hikes for daily necessities could also hurt spending.
Ueda will chair his first policy meeting on April 27-28,
when the board produces fresh quarterly growth and price
forecasts extending through fiscal 2025.
Markets are focusing on whether the board will project
inflation accelerating towards, or even hitting, 2% inflation in
fiscal 2024 and 2025.
Under current forecasts, the BOJ expects core consumer
inflation to hit 1.6% in the current fiscal year that began in
April and accelerate to 1.8% the following year.
Ueda served as BOJ board member from 1998 to 2005, during
which the central bank introduced zero interest rates and then
quantitative easing to combat deflation and economic stagnation.
(Reporting by Leika Kihara; Editing by Sam Holmes)
