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YCC still set to end with Ueda at the helm

The government formally nominated Kazuo Ueda as the next Bank of Japan Governor at yesterday’s Diet session. Since the initial announcement of his candidature last Friday, analysts and investors have been looking for clarity on Mr Ueda’s views. So far there still isn’t much to go on. While he has said monetary policy needs to be reviewed in columns he wrote for the Nikkei Keizai Shimbun in recent years, he didn’t make clear what he thought the BoJ should do. The coming weeks should offer more clarity.

Whichever the case, we still think the Yield Curve Control framework’s days are numbered. For one, the widening of the band in December didn’t provide a lasting respite and the Bank had to purchase a record amount of government bonds last month. For another, the government remains under pressure to respond to rising inflation. The plug should be pulled soon, either when Ueda takes office in April, or even at Mr Kuroda’s last meeting in charge next month.  

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