Ueda warns against magic solutions, sticks to BOJ script

Bloomberg

Bank of Japan (BOJ) Governor nominee Kazuo Ueda warned against any magical solution to produce stable inflation and normalise policy as he largely stuck to the existing central bank script in the first parliamentary hearing to approve his appointment.
During a session that lasted almost three hours, Ueda said the BOJ should continue with stimulus for now, while flagging the need to consider returning to a normal policy approach if the outlook for prices clearly improved.
He said it would still take some time to reach stable and sustainable inflation in Japan backed by wage growth, adding that a joint accord with the government committing the BOJ to its 2% goal didn’t need changing.
“If I’m appointed BOJ governor, my mission isn’t to come up with some kind of magical, special monetary policy,” Ueda said. “As I’ve mentioned before, if you look at the trend in prices, there are improvements we’re seeing, but the situation remains that it’ll still take some time until we’ve securely achieved 2% inflation.”
His comments during the hearing were largely in line with those from senior BOJ officials in recent months including departing Governor Haruhiko Kuroda and suggested a large pivot in April was not in the pipeline. That view was reiterated by Prime Minister Fumio Kishida later in the day.
Ueda remained tight-lipped on the BOJ’s framework for controlling yields, offering little for market players to jump on amid speculation of policy change at the central bank in the coming months.
The yen was little changed after he finished speaking, while bond futures edged up and bank stocks retreated. The moves indicated traders were having difficulty drawing any significant conclusions from the comments.
“Naturally, Ueda didn’t want to tie his hands to any policy before assuming his role,” said Chotaro Morita, chief rates strategist at SMBC Nikko Securities Inc., indicating that Ueda was likely looking for time to assess inflation, policy and its side effects. “That indicates for now that he won’t try to change policy from the get-go even though some market participants are expecting that.”
Global investors and BOJ watchers were closely scrutinising Ueda’s hearing for any hints over how he would run policy as central bank chief amid intense speculation of policy adjustment under new leadership following a decade of massive stimulus.
Bond yields across the globe have risen as central banks pushed up interest rates to tackle inflation in contrast to the BOJ’s easy-money stance.