TOKYO (Reuters) - The Japanese government is considering nominating economist Masazumi Wakatabe, an advocate of bolder monetary easing, as one of the Bank of Japan’s two deputy governors, the Nikkei reported, a sign the bank will be in no rush to dial back its massive stimulus program.
The other deputy governor post will likely go to BOJ Executive Director Masayoshi Amamiya, a veteran central banker known for masterminding various monetary policy steps, the Nikkei business daily reported. Governor Haruhiko Kuroda is widely expected to be nominated for a second term.
The selection of the new BOJ leadership is crucial to global markets, which have recently been volatile on expectations major central banks will whittle down their crisis-mode stimulus.
YOSHIMASA MARUYAMA, CHIEF MARKET ECONOMIST AT SMBC NIKKO SECURITIES
“If Wakatabe replaces Iwata to be deputy governor, since both are reflationists, it would suggest a reflection of Abe’s stance that the BOJ is not rushing to exit (its ultra-easy policy).”
“If the yen firms further and worries grow about its negative impact on the economy, there will be a chance that Wakatabe will propose expanding quantitative easing as he is against cutting negative interest rates further.”
“We expect the BOJ will tweak its yield curve control policy, by raising the 10-year bond yield target, during fiscal 2019. If Wakatabe becomes deputy governor, this factor would not change our projection.”
YOSHINORI SHIGEMI, GLOBAL MARKET STRATEGIST, JPMORGAN ASSET MANAGEMENT
“There will be little impact on markets. In theory, the appointment of Wakatabe could boost talk of more easing. But as was demonstrated by the fact that the yen is strengthening today despite the report, markets already know that the BOJ’s easing has its limits.
“Doing the BOJ trade has already become stale. I don’t see the yen weakening because of the BOJ’s policy. It’s more likely that the dollar/yen will succumb to broad pressure on the dollar.”
“(Prime Minister Shinzo) Abe very much wants Japan to be the bastion of stability where policy is predictable - that’s what Kuroda symbolizes the most.
“He has put in an incredibly able administrator in Amamiya ... He’s chief administrative officer, to keep the bureaucracy running smoothly. He’s an incredibly competent guy.
“There is only one message here - Japan is doing it its own way ... They want to be the ones who are stable, trusted and predictable - no tweets.”
Regarding the appointment of Wakatabe as deputy governor, he said: “The media is so obsessed with the fact that the Fed is hiking rates so therefore the BOJ must hike rates. If you look at the last four or five board meetings, the vote was 8-1 and the one opponent didn’t want a hike, but easier policy. Japan is taking a different path from the Fed. There is a fork in the road. That’s the message.
“Is there somebody with the intellectual weight to make the case for an exit strategy? The answer is absolutely not ... This is a reassertion that Japan remains committed to the greatest monetary policy experiment in history, which is basically monetizing debt.”
“Forex rates moved overnight (on the reports about Wakatabe) but they basically calmed down soon after. But if that scenario plays out it would be good for stocks.
“If the nominations come during trading hours there will probably be some reaction — they’ll be the highlight of today’s market. But there’s a risk that the (nomination process) will hit some speed bumps and that could complicate things.”
“The reported deputy governor picks do not imply a big shift in monetary policy from the current Kuroda-Nakaso-Iwata set-up and the impact on the markets is likely to be limited.”
“Masazumi Wakatabe has been one of the names reported for a while, so it was expected. Though the market is not surprised by the report, its reaction is positive as he is an advocate of bolder monetary easing. If he is appointed, the discussion of an exit plan will likely be pushed back.
“Also positive is that although he is an advocate of monetary easing, he would be against the negative interest rate policy. The BOJ’s negative interest policy has hurt Japan’s financial institutions, regional banks in particular. His appointment should be positive for the financial sector.”
“Governor Kuroda and Executive Director Amamiya have been engaged in monetary policy. If Kuroda continues to be governor and Amamiya becomes deputy governor, the BOJ will keep its current way of thinking on monetary policy.
“Wakatabe is believed to think that further monetary policy expansion is needed, but expectations are for the current policy stance to be continued, led by Kuroda and Amamiya. And the BOJ will maintain its 2 percent inflation target and its monetary policy of quantitative and qualitative with yield curve control.
“I don’t think current forex levels require further monetary easing. The economy is expanding moderately and consumer inflation is retaining its momentum, though it is still low.
“One small concern is that a firm yen could cloud companies’ business outlook and they may become cautious about raising wages in the ‘spring wage negotiations’. This would be a negative factor for Japan’s prices and wages, but this won’t lead to the BOJ’s easing immediately.”
Reporting by Kaori Kaneko, Ayai Tomisawa, Shinichi Saoshiro, Daiki Iga, Linda Sieg, Hideyuki SanoEditing by Chang-Ran Kim and Chris Gallagher