TOKYO, Feb 25 (Reuters) – The Japanese government on Wednesday nominated academics Toichiro Asada and Ayano Sato to join the central bank’s nine-member board, offering signs of how Prime Minister Sanae Takaichi may influence monetary policy.
COMMENTARY:
KATSUTOSHI INADOME, SENIOR STRATEGIST AT SUMITOMO MITSUI TRUST ASSET MANAGEMENT, TOKYO
“The yield curve will twist-steepen as both of these candidates are seen as reflationists. Short-end bond yields will fall as bets for rate hikes by the Bank of Japan recede, and the super-long end will rise as expectations for inflation will grow.”
TOHRU SASAKI, CHIEF STRATEGIST, FUKUOKA FINANCIAL GROUP AND FORMER BANK OF JAPAN OFFICIAL, TOKYO
“Sato-san is a so-called reflationist. She said that a weak yen is good for the Japanese economy and the government can issue more JGBs and that foreign reserves have been unnecessarily accumulated. And she strongly supported Abenomics. And Asada-san supports aggressive fiscal spending and MMT (modern monetary theory).”
“According to the report yesterday, Takaichi-san looks to be negative on higher policy rates and then she chose at least one super-dovish member. These choices reflect the reflationist tendencies of the Takaichi cabinet.”
“Obviously it’s not impossible for the BOJ to hike its policy rate. But if BOJ tries to do so, the government may oppose it, which means a negative factor for the yen.”
TAKAYUKI MIYAJIMA, SENIOR ECONOMIST, SONY FINANCIAL GROUP, TOKYO
“I have no idea how forcefully Asada will again push for reflation, but I don’t think the two incoming members mean the board will shift toward a more extreme reflationist tilt. Practically speaking, it doesn’t feel like a big change.”
“That said, everything depends on how the market takes it. Considering that, Tuesday’s report said Prime Minister Takaichi showed reluctance about a rate hike (in a meeting with BOJ Governor Ueda). In the flow from that, the fact that these two people were chosen this time will likely be read as Takaichi taking a cautious view toward rate hikes.”
“At the very least, since taking office she has made comments showing considerable concern for fiscal discipline. But if you ask whether she appointed two people who place a very strong emphasis on fiscal discipline, well, that’s not really the case here.”
JESPER KOLL, GLOBAL AMBASSADOR AT BROKERAGE MONEX GROUP, TOKYO
“Takaichi’s choice confirms her primary focus for the BOJ is to get pragmatism, not ideology. Both Sato-sensei and Asada-sensei are solid mainstream academic economists who, frankly, have both had very limited contact with real finance investors.”
“If at all, Takaichi’s choice strengthens the iron grip Governor Ueda has on the BOJ. Not only is Ueda a more accomplished and globally recognised academic, but, unlike Sato or Asada, he has had decades of hands-on policymaking experience in both the domestic and global arena.”
EIICHIRO MIURA, SENIOR GENERAL MANAGER OF INVESTMENTS AT NISSAY ASSET MANAGEMENT, TOKYO
“The two-year bond yield may fall as two of the nominees are seen as reflationists, and combined with the previous day’s report from Mainichi newspaper, expectations for an early interest rate from the BOJ will recede.”
“However, five- and 10-year bonds may be sold as a delay in the BOJ’s rate hike will weaken the yen, and that raises expectations for inflation in the future.”
SHOTARO MORI, SENIOR ECONOMIST AT SBI SHINSEI BANK, TOKYO
“(The nominations) will also have a corresponding impact on the future management of monetary policy. Although the course of lifting policy rates itself is expected to be maintained, the timing of hikes will be carefully determined while examining the impact of past increases on the economy and prices. Based on this personnel plan, we believe that the possibility of additional rate hikes at the upcoming March or April meeting has decreased.”
KAZUYA FUJIWARA, FIXED INCOME STRATEGIST AT MITSUBISHI UFJ MORGAN STANLEY SECURITIES, TOKYO
“Both are monetary policy doves. It’s a little surprising, as I thought beforehand that there would be a bit more balance. From this selection, we can guess the stance of Prime Minister Sanae Takaichi to some extent.”
“The initial reaction in the Japanese government bond market appears somewhat muted, perhaps because neither of them is widely known there. With expectations of an early rate hike receding, downward pressure on medium-term interest rates is likely, while concerns about the BOJ falling behind the curve could put upward pressure on long-term interest rates.”
(Reporting by Rocky Swift, Satoshi Sugiyama, Junko Fujita; Editing by Sam Holmes)
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