Angle: Bank of Japan Ueda’s Monetary Policy, “Kuroko Role” for Structural Wage Raises | Reuters

TOKYO (Reuters) – The new regime of the Bank of Japan, headed by economist Kazuo Ueda, will start after approval by the Diet. What the Fumio Kishida administration expects is to conduct policy after analyzing and forecasting the side effects of the “unusual monetary easing” and the economic and price situation. The stance is very different from the second Shinzo Abe administration, which strongly incorporated monetary policy as the “leader” in overcoming deflation and revitalizing the economy. It has been pointed out that what the government is asking the BOJ to play as a “black child” is to improve the environment through price stability, even with respect to structural wage increases, which the administration has identified as a priority issue.

The new administration of the Bank of Japan, headed by economist Ueda, will start after approval by the Diet. What the Kishida administration expects is to conduct policy after analyzing and forecasting the side effects of the “unusual monetary easing” and the economic and price situation. The photo is Mr. Ueda. Photographed at the House of Representatives on February 24, 2023. REUTERS/Issei Kato

“What the Kishida administration wants from the Bank of Japan is not a paradigm shift in monetary policy,” said one government official. The shift from Governor Masaaki Shirakawa to Governor Haruhiko Kuroda 10 years ago was such a drastic change that it has been described as a shift from a “white BOJ” to a “black BOJ.”

On the other hand, what the administration called for in this change in the leadership of the Bank of Japan was policy decisions based on data analysis and a realistic understanding of the situation.

At the hearing on May 24, Ueda said, “If the underlying outlook for prices improves further, we will have no choice but to consider a review in the direction of normalization.” mentioned the possibility of At the same time, he said, “I don’t think there is an immediate need to revise the joint statement by the government and the Bank of Japan that was formulated in 2013.”

In response to Ueda’s series of remarks, Prime Minister Kishida commented at a press conference on the evening of the same day, “There was nothing that the government felt particularly uncomfortable with.”

As the prime minister has avoided making specific comments about whether or not to revise the joint statement, some people around him say that he made a rather in-depth remark as the prime minister.

Mr. Ueda also said that policy decisions are made by changing future prospects based on new information, so surprises may be unavoidable in some cases. However, even if that happens, he said, “We can keep surprises to a minimum” by explaining the way of thinking in simple terms.

In the future, there are concerns not only about the revision of yield curve control (YCC), which has been pointed out to have side effects such as a decline in market functioning, but also the impact on the financial markets and the economy itself due to the speculation of financial normalization depending on the development of the economic and price situation. It is also assumed that there will be a situation where the voices of the voices may spread.

Regarding this point, a high-ranking government official was vague as to whether or not he would specifically demand anything from the BOJ, stating that he could not answer hypothetically. “I’m looking forward to avoiding confusion.”

Prime Minister Kishida plans to meet with Ueda as soon as possible after he assumes the post of governor, and reconfirm how the government and the BOJ should cooperate in the future.

This change in stance is also related to the fact that the administration is facing policy challenges whose effects are unknown in terms of monetary policy.

Amid the growing impact of soaring prices on household budgets, the Kishida administration’s flagship policy, “New Capitalism,” has focused on accelerating corporate wage increases.

At the same time as leading global companies driving wage increases, the Kishida administration aims to create a sustainable wage increase for all employees by raising the minimum wage and facilitating the labor movement of the middle class. It is a figure of “a reasonable wage increase”.

Inflation is currently on the rise in Japan, even though it is a cost-push type of policy. talk.

Ueda also said, “We will implement appropriate policies according to the economic and price situation, and create a situation in which wages will rise structurally in conjunction with the efforts of the business community and various government policies.” On the other hand, he was cautious about including wage increases as a target for the BOJ in a joint statement by the government and the BOJ. Individual companies are the main players in raising wages, and monetary policy will not be the main player in raising wages.

Mr. Ueda says that price stability is “an extremely important infrastructure for the economy.” He argued that once the infrastructure is in place, people and businesses will be able to carry out economic activities and fully demonstrate their abilities without causing unnecessary worries.

Stabilization of prices and the financial system is essential for Japan’s labor market reform, which is a steady and time-consuming policy. A senior official at an economic government office said, “Mr. Ueda, who has a background as an academic, would look good in a black academic gown. If the people and companies are the ‘main characters,’ then Ueda can be said to be a ‘black child’ who helps the actors.”

(Edited by Kentaro Sugiyama, Hiroshi Hashimoto)