On the 10th, the Diet agreed to a personnel proposal to appoint Kazuo Ueda as the new governor of the Bank of Japan.
Mr. Ueda will take office on the 9th of next month to succeed Mr. Kuroda.
We asked Izuru Kato, chief economist of Totan Research, who is familiar with monetary policy, about the issues facing the new system of the Bank of Japan.
Governor Kuroda's evaluation
Q. Next month, the governor of the Bank of Japan will change for the first time in 10 years.
Again, what is your assessment of Governor Kuroda?
A. It is true that unprecedented large-scale monetary easing measures have been implemented over the past 10 years.
Even so, there is a sense of stagnation in the current Japanese economy, and after trying it for 10 years, I have come to understand that monetary policy alone cannot improve the economy.
What did the monetary easing measures bring?
Q. What did the long-term, large-scale monetary easing measures bring about?
A. Monetary easing is a policy that encourages spending by many economic entities and stimulates the economy by lowering interest rates, and low interest rates have a pain-relieving effect on the economy.
However, because I had become accustomed to the effects of painkillers, the structural reforms that should have been carried out did not progress, and I wasted my time.
As an example, comfortable pain relievers have allowed low-profit companies to survive.
Does it appear as a detriment?
Q. Has it already appeared as an adverse effect?
A. If the monetary easing is continued for a long period of time, people's sense of caution about rising interest rates will gradually fade away.
It can be said that Japan today has become a society that does not have a sense of caution against rising interest rates.
Replaced by Mr. Ueda What are the challenges in conducting monetary policy?
Q. You will be replaced by Mr. Ueda, an economist. What kind of challenges await in conducting monetary policy?
A. If monetary policy were to be normalized, there would be screams and complaints all over the place, and there is a risk that the central bank would not be able to carry out policy as intended.
Some economists call this situation a “debt trap.”
However, if we continue with easing without raising interest rates, the interest rate differential with foreign countries will widen and the yen will continue to depreciate. As a result, import prices will continue to rise, making our lives difficult. becoming.
How to strike a good balance and achieve a soft landing will be a major challenge for the next president.
Concerns when working on normalization
Q. Do you have any specific concerns when working on normalization?
A. Since low interest rates have continued for such a long period of time, the government has issued a large amount of government bonds on the premise of that.
As interest rates rise, the government's interest payments will increase, and the first concern is that people will not be able to find the money they want to spend because of the interest payments.
For example, if you have a variable interest rate housing loan, there is a problem that if the interest rate rises, the total interest payment will increase.
Steering under the Ueda system
Q. How do you expect the Ueda administration to steer the company?
A. It is completely unthinkable that the new Governor will suddenly implement severe monetary tightening as part of the monetary policy management.
I think we're going to move forward little by little, step by step.
Based on the new governor's past behavior, the current monetary easing policy called "yield curve control" is expected to be revised.
Currently, the interest rate on 10-year government bonds is kept between 0 and 0.5%, but this is an unnatural policy, so it is likely that the government will end it while showing a willingness to continue purchasing government bonds to some extent.
After that, the next phase will probably be to take a little more time and be more cautious, ending the negative interest rate policy and returning to the zero interest rate policy.
We do not know when the interest rate will be raised in earnest, but it will be difficult until the next phase of global economic expansion.
Is it a policy to hold down interest rates on 10-year government bonds?
Q. Does that mean that the first step is to implement a policy to curb interest rates on 10-year government bonds?
A. The policy of fixing the interest rate on 10-year government bonds is extremely unusual and has never been done anywhere in the world.
The reason why other central banks do not do this is that exit policies are very difficult.
If you notify the market that you will stop fixing interest rates, the market will try to dump government bonds all at once, causing interest rates to skyrocket.
In order to prevent such a thing from happening, it may be necessary to provide a detailed explanation and an announcement that support will be provided for easing drastic changes during the transition period.
In any case, the message after taking office after April will be important.