The next governor of the Bank of Japan (BoJ), Kazuo Ueda, has reiterated his position to continue the lax policy applied in the country in the last decade, considering that the positive effects outweigh the negative ones, although he is not closed to a reform of the entity’s monetary policy to achieve “more sustainable” flexibility if the country’s inflation target remains elusive.
“If core inflation does not rise even if the easing continues, I think we should consider the side effects and mechanisms to adopt a more sustainable easing,” Ueda told the Upper House of the Diet, Parliament, Japanese sections of the NHK public broadcaster’s complaint. . Ueda, 71, made these comments in his last parliamentary appearance before the election to ratify his appointment as head of the Japanese central bank, which, if approved, he will lead as of April 9, taking over from Haruhiko Kuroda.
The businessman and academic, who already submitted to the scrutiny of the Lower House last Friday, has defended the reluctance of the Japanese credit issuer to alter its monetary policy, based on reference interest rates and control of the long-term yield curve, arguing that the current rise in inflation is transitory and is due to the international situation.
Prices in Japan rose 4.3% in January, the tenth consecutive month above the BoJ’s 2% target, but the rise coincided with rising energy and commodity prices in the aftermath of the war in Ukraine and the ravages of the the pandemic, and not from desirable internal factors, with a stable salary increase. Added to this is a more moderate evolution of core inflation (which excludes the price of energy and food due to their high volatility), which in the first month of the year was 3.2%, but did not exceed the barrier of 2% until last October.
“The benefits of monetary easing outweigh its side effects” and the BoJ’s current policy “has contributed to improving corporate income and employment, pulling the country out of deflation,” Ueda said today, recalling that any policy it has “collateral effects” that must be “compared and considered before implementing a more appropriate policy.”
“When the forecast of reaching the 2% inflation objective in a stable and sustainable manner materializes, the exit must begin” from the previous measures, in addition. On the challenges ahead upon his arrival at the BoJ, the academic said that “the situation is extremely difficult for anyone”, and that he would like to use his experience as a former member of the body’s monetary policy board (almost two decades) and as an academic “to tackle this challenging problem.