Former Bank of Japan board member Takako Masai has called on Governor Kazuo Ueda to refine his communication style, expressing concerns that recent remarks have confused markets and led to the belief that an exit from ultra-loose monetary policy is imminent.
Less than a year into his role, Governor Ueda has twice surprised markets with comments about the policy outlook, most notably on December 7. During a parliamentary session, he outlined potential post-negative interest rate policy measures, prompting a surge in bond yields and the yen. Despite the anticipation, the BOJ did not alter its ultra-loose policy or dovish guidance this month.
Masai, in an interview on Monday, criticized Ueda's hawkish statements in parliament, highlighting a contrast with recent comments from other board members cautioning against premature discussions on an exit. She questioned whether the governor accurately represented the board's collective view in public statements.
"As chair of the policy meetings, the governor shouldn't speak beyond what has been decided at the board," said Masai, who served on the BOJ's nine-member board from 2016 to 2021. She expressed concern that the inconsistency in recent communication could limit the BOJ's options on the exit timing by leading traders to anticipate imminent action.
With inflation surpassing the BOJ's 2% target for an extended period, market expectations for a lift in short-term rates out of negative territory next year are prevalent, with some anticipating action as early as January.
Masai cautioned that achieving a positive wage-inflation cycle in a country that has faced decades of stagnant price and wage growth would take time. Ending the ultra-loose policy prematurely could run counter to the government's focus on achieving durable wage growth and preventing a return to deflation.
Prime Minister Fumio Kishida has prioritized a complete exit from deflation, unveiling measures to encourage firms to boost wages. However, Masai emphasized the challenge in anticipating a swift policy change, given the dovish comments from various board members and the government's economic assessment.
The BOJ board convenes eight policy-setting meetings annually, with the governor leading each session and providing explanations at post-meeting news conferences. As Governor Ueda navigates future communications, the market remains watchful for clarity on the central bank's stance and potential policy adjustments.
