Central Plains Shun Report February 13, 2023　 Special Issue

The Government vs. Bank of Japan Behind the Nomination for the BOJ Governor: The Dark Tug-of-War and the Accord

The vice governor Amamiya, who was reported to be the strongest candidate and even approached, refused. The appointment of the BOJ governor was solidified to be Masato Ueda, an economist and former BOJ Policy Board member (71). Kuroda's term runs until April 8. The government will submit the personnel proposal to the Diet on February 14. After the approval of both Houses of Congress, the government will appoint. The vice governors will be Shinichi Uchida and Naomichi Hiyamino (former Financial Services Agency Commissioner). The government initially approached Vice Governor Masaka Amamiya as the successor to Kuroda, but he declined.

■ LDP's Circumstances

Professor Ueda is a theoretical proponent of monetary easing. He is regarded as the theoretical leader when zero interest rate and quantitative easing policies were promoted, credited with inventing the timing effect of quantitative easing.

The timing effect refers to the additional positive impact that emerges when considering what other easing measures exist after the BOJ lowers the policy rate to zero percent. For example, if the BOJ declares a commitment to continue zero-interest-rate policy until the consumer price inflation rate turns positive, expectations for long-term monetary easing will be cultivated, and long- to medium-term interest rates will fall based on those expectations. Simply setting the rate at zero makes it unclear when the BOJ will raise rates in the future, so long- to mid-term rates are less likely to fall; but by attaching a commitment, broader declines in rates can be promoted.

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