Japan's new central bank Governor Kazuo Ueda gave a clear message to policymakers gathered for global finance meetings here over the last week: The country will remain a dovish outlier by keeping interest rates ultra-low - at least for now.
Since taking the helm a week ago, Ueda has dropped some hints the massive stimulus of his dovish predecessor Haruhiko Kuroda will eventually be phased out.
Japan's inflation, now around 3%, will slow back below the BOJ's 2% target later this year on falling import costs, Ueda told Thursday's bigger gathering of ministers from the Group of 20, in explaining his plan to keep monetary policy ultra-loose for now. The 10-year yield is currently a shade below the cap at 0.47%, but on repeated occasions earlier this year traders drove it above 0.5%, pressing the BOJ to defend the mark.Ueda will chair his first BOJ policy meeting on April 27-28, when the board will issue fresh quarterly growth and inflation forecasts that will come under scrutiny for signs on how soon the central bank projects inflation to sustainably hit its 2% target.
"Ueda and his deputies are taking care not to give any hint on the timing of a policy tweak," said former BOJ official Nobuyasu Atago, currently an analyst at Ichiyoshi Securities.Reuters GraphicsIntensifying global debate over the cost of delaying monetary tightening could challenge the BOJ's view the recent cost-driven inflation will prove temporary.
The IMF had a piece of advise to Ueda: relax the BOJ's control and allow long-term rates to rise more flexibly - a move that will help ease the strain on the banking sector.
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