Kazuo Ueda’s Appointment as BOJ Governor: Towards a Pragmatic Future?

9 min readApr 21


If we hear about Japan, what do we think? For many people, the first thing we think about is technology and almost a utopia. But, as a matter of fact, Japan’s economy since the ’90s has been facing a downward trend since the ’90s. Periods of stagflation and a decrease in the fertility rate have hurt Japan’s long-term health economy. This is further magnified by the central bank, the Bank of Japan’s (BOJ) monetary policies. With this in mind, does the government of Japan feel the need for reform, or would they rather stick to their old ways? While the latter seems logical, seeing Japanese culture as sticking to its old ways, the former seems to be a reality following a certain appointment.

Who is Kazuo Ueda?

On the 10th of March, 2023, the Japanese government approved the appointment of the new BOJ Governor, Kazuo Ueda. The appointment might shock many, as this marks the first time the BOJ has appointed a new governor since 2013. It might be a good change for the country’s weakening monetary policy and economy. Now a question I am sure is in everybody’s mind, who is he? And why does he matter?

Kazuo Ueda is a Japanese veteran economist born in Japan in the 50s. Mr. Ueda achieved his Ph.D. in economics at the Massachusetts Institute of Technology (MIT) in 1980. At MIT, he was under the academic tutorship of the former Vice Chair of the Federal Reserve of the USA, Stanley Fischer. He has been called “Japan’s Ben Bernanke’’ by a fellow student of Fischer’s tutelage due to his stance on being a balanced pragmatic rather than a hawk or a dove.

After his Ph.D., Ueda-san taught economics at the University of British Columbia before returning to Japan to be appointed Dean of the Faculty of Economics at the University of Tokyo. Ueda-san also served as a board member of the Bank of Japan Policy Board from 1998 to 2005, when the central bank implemented a zero-interest rate policy and began using quantitative easing measures for the first time. (Carson et al., 2023)

As stated before, he is a pragmatist in his view of monetary policy. In one interview, he states,

“Monetary policies must be conducted based on the current state and especially the outlook for the economy and prices. From that perspective, I think the current BOJ policy is appropriate, and anyway, monetary easing must carry on given the current state.”

In another light, in a Nikkei opinion piece from last year, Ueda expressed his opinion that the BOJ should not raise interest rates too quickly because inflation had surpassed 2%. However, he also suggested that the central bank devise an exit strategy for its ultra-loose monetary policy and review its unconventional stimulus program at some point. Showing more flexibility is the keyword when understanding Kazuo Ueda’s stance on monetary policies.

Japanese Economic Legacy

Source: University of Berkeley

To understand Ueda-san’s appointment, we must first understand Japan’s current position. After WWII, Japan experienced an “economic miracle” between 1945–1991, when the Japanese economy maintained and sustained rapid economic growth. Real economic growth only slowed down in 1973. However, in 1991, stock prices crashed; by mid-1992, equity prices fell by 60% (Callen et al. 2003). The 1990s was coined as the “Lost Decade,” in which Japan’s real economic growth had only averaged 1 percent on a 10-year basis, way less than other developed countries.

Source: Macrotrends

After 2008, especially in 2012, when the late Shinzo Abe was appointed as Japan’s prime minister, he tried to curtail the effects of the “Lost Decade,” and the 2008 crisis with a new style of economics coined “Abenomics.” In this era, Abe programmed a three-arrow approach to combating years of stagflation:

  • Monetary policy: a hyper-easy monetary policy with negative interest rates to make borrowing and spending cheaper for consumers and companies.
  • Fiscal stimulus: injecting money into the economy by spending on infrastructure or providing financial incentives to companies through tax breaks.
  • Structural reforms: corporate reform, increasing women’s participation in the workforce, labor liberalization, and allowing more migrants to join the workforce to ease labor pressures and boost economic growth.
Source: The World Bank, Tradingeconomics

Monetary policy-wise, the BOJ has consistently enacted an ultra-loose monetary policy over the tenure of former BOJ Governor Haruhiko Kuroda under Prime Minister Shinzo Abe and Yoshihide Suga. The BOJ set the highest rate in 2013, the first year of Kuroda’s tenure, and is, to this day, the highest rate over his tenure. The BOJ in 2017 set a constant -0,1% rate that is still enacted to this day.

While Abenomics worked politically for Shinzo Abe, the long-term economic benefit fell short of the target, as Japan’s GDP never hit the 600 trillion yen mark, a goal set by the Abe administration by 2020. He also faced criticism on multiple fronts during his tenure. In addition to economic policy shortcomings, he faced backlash for mishandling the COVID-19 pandemic. Opponents criticized Abe’s campaigns to encourage domestic tourism for contributing to a resurgence in infections.

Furthermore, Abe’s signature economic policy, Abenomics, was also subject to criticism. While it aimed to revitalize the Japanese economy through monetary easing, fiscal stimulus, and structural reforms, critics argue that it fell short of delivering on its promises. For instance, the initiative failed to significantly increase the participation of women in the workforce or tackle problems such as nepotism, unhealthy work cultures, and overall consumption never reached the target despite the stimulus. Despite these criticisms, Abenomics was considered a defining feature of Abe’s political legacy as Prime Minister.

Kishida, the reformer?

While Abe-san is a well-respected prime minister who will go down in history as Japan’s longest-serving prime minister, signals are ringing inside the Japanese government that changes, for better or worse, will come in the following years. One of the biggest contributors to Japan’s shift in policy making is the appointment of Fumio Kishida as the Prime Minister of Japan, who took power after Yoshihide Suga’s resignation in April 2021.

In an interview, he stated,

“Abenomics clearly delivered results in terms of gross domestic product, corporate earnings, and employment. But it failed to reach the point of creating a ‘virtuous cycle,’… I want to achieve a virtuous economic cycle by raising the incomes of not just a certain segment but a broader range of people to trigger consumption. I believe that’s the key to how the new form of capitalism is going to be different from the past,”

From this statement, it is clear that Kishida-san is looking for a long-term solution for Japan’s future as a global superpower while detracting from his predecessors.

How does Ueda-san fit in all of this? We first need to look at a chart of BoJ policy board members’ stance shifts from Haruhiko Kuroda’s decade-long presidency to Ueda’s. From a chart retrieved from Bloomberg, we can see that Ueda stands in the middle of the board in contrast to Kuroda’s Dovish stance. While there is a jump in stances for the governor, most board members still held a dovish stance, but with a shift towards financial stability rather than sustainable inflation. The shift in stance might affect Ueda-san’s policy-making in the following months, as he took a more timid and transitional period toward monetary policy.

What’s Next for Ueda and Japan?

While Ueda-san’s appointment is a sign of reform, it is clear that his governance will tackle a lot for the future of Japan. Japan’s economy barely grew in Q4 of last year, as annualized GDP was revised to 0,01% as consumption barely increased.

According to data from Reuters, private consumption, which accounts for more than half of Japan’s GDP, increased by 0.3%. It was downgraded from an earlier estimate of 0.5%. The data revealed that spending on services such as hotels, restaurants, and goods was weaker than initially anticipated. Capital spending, which was expected to decrease by 0.4% according to market forecasts, fell by 0.5%, and it remained unchanged from an initial estimate. Meanwhile, although the Ministry of Finance reported increased manufacturers’ output capacity in Q4 of 2021, capital spending continued to decline. Revised GDP growth was affected by decreased domestic demand, which reduced growth by 0.3 percentage points, while net exports added 0.4 percentage points.

The Japanese economy has been hit by several challenges, including a slowdown in overseas demand due to a global economic downturn. This has resulted in a record trade deficit and a significant contraction in factory output in January, marking an eight-month low. Although domestic demand has offered some support thanks to the relaxation of COVID-19 measures, the prospects of a consumption-driven recovery are being undermined by inflation, which has reached its highest level in four decades.

The government and the Bank of Japan (BOJ) are calling on companies to increase workers’ wages during the annual spring negotiations, known as “shunto,” concluding this month. While major companies are expected to offer the largest pay rise in 26 years, it is projected to include only a 1% increase in base pay. This has raised doubts about whether Japan can achieve sustainable wage gains that are seen as crucial for the BOJ to achieve its 2% inflation target.

Despite these challenges, the BOJ is expected to maintain its ultra-easy monetary policy at the two-day rate review, which will conclude on Friday, April 7th, 2023. This will be the last review to be led by Governor Haruhiko Kuroda and the first thing Governor Kazuo Ueda must tackle in his tenure. Japan must take crucial steps to keep its country afloat and its status as one of the most economically sound countries in the world while keeping level-headed decisions. As a Japanese proverb says, “Even monkeys fall from trees.”

By Mohammad Imam Prabowo | Ilmu Ekonomi 2022 | Staff Divisi Kajian Kanopi FEB UI 2023


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