Japan's parliament on Friday approved academic Kazuo Ueda as the next Bank of Japan governor, entrusting him with the formidable task of minimizing the side effects of the central bank's protracted monetary easing and smoothing the way for an exit strategy once its inflation target is within reach.
Ueda, 71, will be the first BOJ chief from academia in postwar Japan, taking over on April 9 from Haruhiko Kuroda, who has been at the helm for 10 years. Friday's approval by the House of Councillors set the stage for the government to formally appoint Ueda, as the more powerful House of Representatives gave the go-ahead a day earlier.
The nominees for deputy governors -- Ryozo Himino, a former commissioner of the Financial Services Agency, and Shinichi Uchida, an executive director at the BOJ -- were also endorsed by parliament. They will succeed Masayoshi Amamiya and Masazumi Wakatabe on March 20 for five-year terms.
The surprise selection of Ueda in February has been taken as an indication that Prime Minister Fumio Kishida wants a gradual departure from the "Abenomics" economy-boosting program that entailed powerful monetary easing as a major pillar.
As BOJ chief, Ueda will be tasked with better communicating the central bank's thinking behind its monetary policy guidance, after Kuroda, known for making decisions that surprised the markets.
The BOJ's attempt to keep short-term and long-term interest rates at rock-bottom levels has led to aggressive government bond purchases and a bloated balance sheet.
Japan is now grappling with a weak yen, which has fallen to levels not seen in decades against the U.S. dollar, a byproduct of the BOJ's dovish stance that has inflated import costs for the resource-poor nation.
Still, the new BOJ leadership has been lauded by analysts as well balanced. Ueda is a monetary policy expert whose theoretical knowledge helped the BOJ introduce a zero-interest rate policy and embark on quantitative easing. He sat on the decision-making Policy Board between 1998 and 2005.
Himino, 62, is an internationally minded financial regulator, while Uchida, 60, has been in charge of policy design under Kuroda and knows the central bank's inner workings.
"I know (Ueda) very well, and he is an excellent economist who is well versed in monetary policy," Kuroda told a press conference after his last policy-setting meeting as governor.
"I hope he will guide monetary policy appropriately based on real-time economic, price and financial conditions once he assumes the post of governor."
For now, Ueda has been stressing the importance of maintaining monetary easing as the BOJ's 2 percent inflation target is not expected to be attained in a sustainable and stable fashion, a view echoed by his would-be deputies in confirmation hearings in February.
He has also dampened market expectations that he will immediately scrap the BOJ's controversial yield curve control program while keeping hopes alive for its future reworking or complete abandonment.
Under yield curve control, the BOJ sets short-term interest rates at minus 0.1 percent while allowing 10-year Japanese government bond yields to trade around zero percent.
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