NIKKEI: Kazuo Ueda and the Bank of Japan

February 11, 2023

Winds of change at Japan’s central bank

Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by Tokyo based NIKKEI in an article — by Yuta Saito, Yumiko Oshima, and Momoe Ban, Ueda Appointed as New Governor of the Bank of Japan — regarding Japan’s appointmemt of Kazuo Ueda, a Massachusetts Institute of Technology PhD in Economics and committee member of the Bank of Japan (BoJ), as the BoJ’s new governor.

Japan’s monetry trap?

The threat of rising interest rates is creating a monetary trap and possible future financial crisis for the great island nation of Japan. As an academic, Kazuo Ueda could bring fresh policy ideas to the Bank of Japan (Japan’s central bank) at a time when they’ll need to navigate away from extremely loose monetary policies.

Kuroda’s first move

In December, current Bank of Japan (BoJ) governor Haruhiko Kuroda abruptly changed policy by raising the yield control curve (YCC) ceiling on their 10-year government bonds from 0.25% to 0.5%. Higher bond rates may help strengthen the Yen, incentivize more Japanese money to either return to or remain in Japan, and globally, from a macro perspective, induce some marginal selling of risky assets. To a larger degree, this move was a relief to see because it set the tone for change after Kuroda’s decade at the helm of a low interest rate policy that led Japan (and the world) towards easy money. Kuroda’s move was a tacit approval for any new governor to continue and make the transition to a new BoJ policy and aid long-term market stability.

A rising Yen is a nod of approval for Ueda

The rise in the Yen on the nomination of Kazuo Ueda as the next governor is a vote of approval from financial markets as well as an acknowledgement that Japanese interest rates could rise in the future as policies shift.

Quoted article excerpt is below:

With the exit of super-easing measures, the Bank of Japan has a fresh windof change

Michael Ashely Schulman, Chief Investment Officer, Running Point Capital Advisors






Bank of Japan
Bank of Japan — Graphics and design by

“Three major building blocks of the analysis of a country’s monetary policy are
the reaction function of the central bank, or the ultimate targets of policy;
short-run monetary control; and the transmission mechanism.”

Kazuo Ueda, “A Comparative Perspective on Japanese Monetary Policy:
Short-Run Monetary Control and the Transmission Mechanism,” 1991

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