Thursday, June 8, 2023
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Incoming BOJ Governor Ueda to speak in parliament as yield cap comes under attack

By Leika Kihara

TOKYO (Reuters) – Incoming Bank of Japan Governor Kazuo Ueda will address parliament on Friday, giving markets a glimpse of the central bank’s new look Banks can steer out of ultra-low interest rates.

Ueda’s confirmation hearing in the House of Representatives will last for nearly three hours from the 9th: 25 am (30GMT), as markets again attacked the central bank’s yield curve control (YCC) policy to bet on a near-term rate hike.

Earlier this month, the government named 1998 as an academic of the age, a surprising choice to become the next central bank governor to end the unpopular YCC policy .

With inflation exceeding the BoJ’s 2% target, Ueda faces the tricky task of phasing out YCC, a policy that has drawn public criticism for distorting market function and squeezing banks’ profits.

People who know Ueda describe him as a prag Matiste who is neither hawk nor dove. Ueda played a key role in the bank’s introduction of forward guidance to enhance the effect of its zero interest rate policy.

In a column published last July, Ueda warned against raising rates too soon, but said the BoJ must eventually consider how to exit its ultra-loose policy.

Subject to parliamentary approval, he will succeed Haruhiko Kuroda, whose second five-year term ends on April 8.

Government deputy governor nominees – former bank regulator Ryozo Hino and BOJ Governor Shinichi Uchida – will testify after Ueda in the afternoon.

The Senate will hold confirmation hearings on Monday with two representatives on the field and Tuesday.

Under YCC, BOJ guides short-term rates to -0.1% and Yields on one-year bonds are around 0% as part of efforts to sustainably meet the 2% inflation target.

Under pressure from rising global interest rates, the Bank of Japan was forced to raise interest rates in December with the implicit implication of its annual yield target The cap was raised from 0.25% to 0.5% – a move that boosted market expectations for a near-term adjustment to the YCC.



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