central banks

At Bank of Japan’s helm, MIT-educated Ueda to put theory into practice


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At Bank of Japan’s helm, MIT-educated Ueda to put theory into practice

BANK OF JAPAN. Kazuo Ueda speaks to media in Tokyo, Japan, February 10, 2023.


People who know him say Kazuo Ueda is a pragmatic policymaker-type academic who can adjust his views on monetary policy flexibly, making him hard to brand as either a hawk or a dove

TOKYO, Japan – A soft-spoken academic with a PhD from the Massachusetts Institute of Technology (MIT), Kazuo Ueda – Tokyo’s nominee for next Bank of Japan (BOJ) governor – is a pragmatist who knows how to turn policy ideas into reality.

Unlike incumbent Governor Haruhiko Kuroda, who arrived with a clear mandate to beat deflation with massive stimulus, Ueda faces the delicate task of phasing out his predecessor’s radical and complicated policy framework without derailing a fragile economic recovery.

His academic credentials suggest he is fit for the job. At MIT, he studied economics under Stanley Fischer, whose students include former US Federal Reserve chair Ben Bernanke and former European Central Bank president Mario Draghi.

As the first postwar BOJ governor to come from academia, the 71-year-old also brings a wealth of experience helping guide Japan’s economy through rough waters – including during his time at the central bank’s nine-member board from 1998 to 2005.

One of the tools he helped put in place in 1999 to combat a banking crisis and debilitating deflation back then was forward guidance, in which central banks explicitly communicate future interest rate intentions as a way of influencing spending and investment behavior.

People who know him say Ueda is a pragmatic policymaker-type academic who can adjust his views on monetary policy flexibly, making him hard to brand as either a hawk or a dove. He is a good listener and a consensus-builder, rather than a leader with a strong view on the direction of monetary policy, they say.

“His style is to discuss monetary policy based on facts and evidence,” said Tetsuya Inoue, who was Ueda’s staff secretary when he was a central bank board member.

“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.”

A fan of the Tokyo Yakult Swallows baseball team who likes going out for drinks with colleagues and former schoolmates, Ueda is described by associates as approachable and open-minded, as well as being a sharp-minded theorist who favors empirical analysis and data.

Even after retiring as board member, he has been close to the BOJ. A good number of students he taught at the prestigious University of Tokyo now work at the bank.

As an adviser to a BOJ-affiliated think tank, he frequently appeared in its international panels and was among a handful of academics called upon by central bank executives for policy suggestions.

“He’s always calm and never loses his temper. He’s great at finding the middle ground and won’t get in the way unless absolutely necessary,” said a former BOJ official who worked at the bank when Ueda was board member.

Like Kuroda, Ueda understands the dangers of deflation and the difficulty of breaking Japan’s sticky deflationary mindset that took root during decades of falling or flat price growth.

In a column published in July, Ueda warned against raising rates prematurely in response to cost-push inflation – a sign he would be in no rush to tighten monetary policy.

But he also pointed to the difficulty of maintaining yield curve control when inflation perks up and the potential flaws of the policy, suggesting the days of YCC may be numbered.

In a book published in 2005, Ueda voiced skepticism over the effect of massive asset-buying and warned of the difficulty of affecting public perceptions with monetary policy – views that contradict with those of Kuroda.

“At some point in the future, the BOJ must take a hard look at the extraordinary monetary policy framework that has lasted longer than many people expected,” Ueda wrote in the column.

Jesper Koll, an expert director at Monex Group in Tokyo who as a veteran Japan watcher had close interactions with Ueda, expects him to tread carefully but not shy away from change.

“I can guarantee you that he’s not interested in – and he’s under no pressure to provide – quick wins, in any fashion,” Koll said. “When the facts change, I change my mind. That’s Ueda. He’s a man of science. He’s not a man of dogma.”

Upon approval by parliament, Ueda will assume the top BOJ post on April 9 and chair his first policy-setting meeting on April 27 to 28. – Rappler.com

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