Almost from the moment he was sworn in as Bank of Japan governor, Kazuo Ueda sounded like a guy who wanted to be done with negativity.
It just wasn’t obvious why. As the BOJ this week considers a third tightening, his argument for raising interest rates has become clear — in case they need to be cut later. It has a certain circularity to it. But now the bank is forging further into positive territory, the path ahead is much trickier and the potential for a mistake far greater.
One of his first acts as governor in 2023 was to commission a report into the successes and shortcomings of the institution’s response to the so-called lost decades. This period lasted from roughly the last years of the 20th century through to Ueda’s ascent. His distaste for negative borrowing costs, a radical step undertaken by his predecessor Haruhiko Kuroda, is clear in the document’s findings that were released in late December. Rates below zero may have made sense in an era when deflation was public enemy number one, but the sooner they were consigned to the history books, the better.
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