*
BOJ open to idea of conducting review, which flagged by
Gov Ueda
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Uncertainty remains on timing, format - sources
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Any review will focus on long-term impact, not policy
hints
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Communicating intention of review could be challenging
(Recasts with source confirmation, adds details)
By Leika Kihara
TOKYO, April 24 (Reuters) - The Bank of Japan may
conduct a comprehensive review of the impact of the monetary
easing steps it has taken over the longer term, an idea recently
flagged by its new governor Kazuo Ueda, three sources familiar
with its thinking said.
But there is uncertainty on how soon, and in what format,
the central bank could launch such a review, which will be a
topic of discussion at upcoming policy meetings, they said.
"While the timing is uncertain, it's an issue that will
likely be discussed," one of the sources said, a view echoed by
two other sources. The sources requested anonymity as they were
not authorised to speak publicly.
Any review likely won't have immediate policy implications,
and instead focus on structural factors such as lessons drawn
from the BOJ's long battle with deflation, the sources said.
The Sankei newspaper reported on Sunday the BOJ may start
discussions on the review as soon as its two-day meeting that
ends on Friday, which will the first one to be chaired by Ueda.
"If the BOJ were to start discussions in April, the timing
would be a surprise," said Toru Suehiro, chief economist at
Daiwa Securities.
"But it won't change the BOJ's stance of patiently
maintaining ultra-loose monetary policy, with an eye on its side
effects," he said.
At his inaugural news conference on April 10, Ueda said it
could be a good idea to conduct a comprehensive review of the
BOJ's monetary policy dating back to its prolonged battle with
deflation decades ago, though adding it was something he needed
to discuss with the nine-member board in reaching a conclusion.
BOJ Deputy Governor Shinichi Uchida, before assuming that
role in March, had also said the central bank could learn from
the experience of U.S. and European counterparts' year-long
review of their monetary policies.
Among others in the board, former commercial bank executive
Naoki Tamura has called for a review of the BOJ's policy,
including the side-effects of prolonged easing.
At this week's meeting, the BOJ is expected to maintain its
targets set under yield curve control (YCC), which guides
short-term rates at -0.1% and the 10-year bond yield around
zero.
The BOJ conducted an examination of its policy framework
twice during former Governor Haruhiko Kuroda's term. The first
time was in 2016, when it introduced YCC in a shift away from a
policy targeting the pace of money printing.
The second was in 2021, when the BOJ took steps to address
the side-effects of YCC such as allowing long-term yields to
move more flexibly around its target.
Convincing markets another review won't have near-term
policy implications could prove challenging, with many investors
betting that Ueda will soon steer the BOJ away from the radical
stimulus programme of his predecessor.
"If Ueda indeed moves swiftly toward conducting a review,
that may reflect the BOJ's reluctance to continue with the
current massive stimulus," said Naomi Muguruma, senior market
economist at Mitsubishi UFJ Morgan Stanley Securities.
"Very few market participants will buy the idea that the
review would be aimed just as a record of the past."
(Reporting by Leika Kihara; Editing by Susan Fenton and
Bernadette Baum)
