Academic, policy architect, banking expert form BOJ’s new leadership

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan’s incoming governor Kazuo Ueda will lead a powerful trio that includes a technocrat who designed yield curve control, and a former banking-sector regulator who can look after the fallout from a future end to low interest rates.

As an academic specialising in monetary policy, Ueda will likely focus on timing a smooth exit from yield curve control (YCC) and re-designing what has become a framework difficult to sustain as inflation perks up, analysts say.

The government nominees for his two deputies – career central banker Shinichi Uchida and former banking watchdog chief Ryozo Himino – would bring expertise as bureaucrats to work out the details in putting Ueda’s policy ideas into shape.

Having spent most of his career drafting monetary policy plans, Uchida has worked closely with deputy governor Masayoshi Amamiya in master-minding many of the BOJ’s policy ideas including YCC, say sources familiar with the matter.

Uchida was re-appointed for a rare, second term last year as the BOJ’s executive director, a move seen by analysts as laying the groundwork for a smooth transition in case the top central bank post goes to someone outside the institution.

People who know him describe the 60-year-old Uchida as a sharp-minded technocrat who is skilled at designing innovative monetary tools, and worked well with incumbent governor Haruhiko Kuroda as well as his less-dovish predecessor Masaaki Shirakawa.

“He’s probably among the best placed to dismantle YCC as he played a key role crafting it,” said one of the sources, a view echoed by two more sources.

“As deputy governor, Uchida will probably be the core in monetary policy decisions,” said a former BOJ board member who recently spoke with Uchida.

As the sole career central banker in the BOJ’s leadership, Uchida will also oversee an institution with staff of over 4,600 handling a range of operations beyond monetary policy.

As former head of the Financial Services Agency (FSA), Himino brings his expertise on financial regulation and overseas contacts cultivated during his stint as an executive at the Financial Stability Board (FSB) – a global body coordinating financial rule-making among Group of 20 major economies.

The appointment of Himino suggests the BOJ will put more emphasis in looking at the impact of its ultra-low policy on the banking sector, a contrast to Kuroda’s approach of focusing on the economic benefits of prolonged easing, analysts say.

During his stint at the FSA, the 62-year-old Himino worked with the BOJ in designing programmes to prod regional lenders to beef up profitability and combat headwinds from prolonged low rates and a rapidly ageing regional population.

“It’s a very powerful trio of technocrats who can get the job done as a team,” said a second source.

“With this team, coordination between the BOJ and FSA will strengthen and help enhance Japan’s presence in global discussions on financial regulation.”

The two deputy governors will assume their posts on March 20, taking over from incumbents Amamiya and Masazumi Wakatabe. Ueda will join as BOJ governor on April 9.

(Reporting by Leika Kihara; Editing by Sam Holmes)