BOJ Candidate Picked for Global Communication Skills

The Yomiuri Shimbun

7:00 JST, February 15, 2023

The government on Tuesday presented Kazuo Ueda’s nomination as the next Bank of Japan governor to a meeting of the directors of the Committee on Rules and Administration in both Diet houses.

The 71-year-old economist will succeed outgoing BOJ Gov. Haruhiko Kuroda, 78, whose term ends on April 8. This article examines how the government chose Ueda, who will be the first academic to serve as chief of the nation’s central bank.

“I want a person who can engage in active, theory-based communications with the central bank governors of other countries,” Prime Minister Fumio Kishida said to close aides concerning the selection of candidates for the next BOJ governor, which got fully underway last summer.

With the United States and Europe raising interest rates, BOJ policies have become more complicated. Kishida therefore believed that international dialogue skills would be essential for the new governor to implement the bank’s policies.

Ueda emerged as a candidate because he is fluent in English and has ties to former central bank governors around the world. Like former U.S. Federal Reserve Chairman Ben Bernanke and former European Central Bank President Mario Draghi, Ueda is also a renowned economist and took classes at the Massachusetts Institute of Technology taught by Stanley Fischer, a famous economist who served as the U.S. Federal Reserve vice chair.

At the end of last year, a senior government official met behind-the-scenes with Ueda for the first time and confirmed his basic positions, including Ueda’s approval of the central bank’s policy of continuing large-scale monetary easing. In late January, the government largely decided on a plan to nominate Ueda as the next BOJ governor.

3 persons recommended

Last autumn, about six months before the end of Kuroda’s term, the government prepared a list of candidates that included the names of academics such as Kazuo Ueda, a professor at Kyoritsu Women’s University; Takatoshi Ito, a professor at Columbia University; and Tsutomu Watanabe, a professor at the University of Tokyo.

Shortly before that, around the summer of 2022, the central bank recommended different people to the Finance Ministry, the bank’s dialogue partner on the government side, and to politicians who are close to the bank. The people recommended by the bank at that time were Masayoshi Amamiya, the BOJ deputy governor; Hiroshi Nakaso, a former deputy governor who supported Kuroda, and Hirohide Yamaguchi, a former deputy governor who worked under former BOJ Gov. Masaaki Shirakawa.

The central bank’s monetary policies have become increasingly complicated due to large-scale government bond purchases that began in 2013 and unprecedented monetary policies such as a negative interest rate policy. It was strongly believed that only someone from the central bank would be able to maneuver such complex policies, and some government officials agreed with that position.

Amamiya is known for being particularly well-versed, as he has been involved in many of the central bank’s monetary policies over the past 30 years. Many believed that Amamiya would be the right choice to ease market fluctuations, which have been increasing partly due to interest rate hikes in the United States and Europe.

However, Amamiya himself recommended three academics, including Ueda, as candidates, according to informed sources.

Turning point

Since last year, Amamiya has said, “I’m not suitable for the job” whenever his name was mentioned, within or outside the bank, as a candidate for governor.

Amamiya has worked for BOJ governors for the past 30 years and been involved in policy making, from the time when the central bank was cautious about monetary easing to the time when it began unprecedented monetary easing under Kuroda. That has resulted in Amamiya being subject to thoughtless remarks such as “he’s very changeable,” not only from outside people but also from current and former BOJ officials.

Last autumn, Amamiya reportedly told an aide who is close to Kishida and Kuroda, “It’s difficult for me to critically review policies that I myself have been working on.” The same applied to Nakaso, who served as deputy governor under the Kuroda regime.

Given that Yamaguchi served as deputy governor in the pre-Abenomics period when the central bank was careful about monetary easing, the government found it difficult to tap him as the next governor. The government therefore began considering appointing an academic to the post at the end of last year.

In February, when the government entered the final selection stage, many market players still considered Amamiya the most likely candidate and Nakaso the runner-up, while some believed women could be appointed as deputy governors. Finally, the government went with a “troika” structure consisting of experts, naming a theory-based academic as governor and two professionals — one in monetary policy and the other in the supervision of financial institutions — as deputy governors.

Ryozo Himino, 62, and Shinichi Uchida, 60, will support Ueda. Uchida, who is seven years younger than Amamiya, will be in charge of internal control of the central bank.

Some of the leadership team might aim to become BOJ governor in five or 10 years. Himino will be responsible for coordinating with authorities of other countries in the global financial sector, which is helpful for the central bank that oversees the management of financial institutions.

“The new leaders will be able to have discussions that suit the circumstances,” a senior BOJ official said. “I might be misunderstood if I say this, but it’s a ‘strangely’ good combination of personnel who can discuss things properly.”

The new governor and deputy governors, which Kishida referred to as the “most powerful team,” are also welcomed by the central bank itself. The selection of the new governor ended up illustrating the good relationship between the government and the central bank at a time when monetary policies have become more complicated and difficult.