Japan's New Central Bank Chief Vows to Guide Policy 'Flexibly'

Japan's new central bank governor Kazuo Ueda said on Monday he will communicate closely with the government and guide monetary policy flexibly, warning of high uncertainty over the economic outlook.

Ueda faces a bumpy road as slowing global growth clouds prospects for a sustained pickup in inflation and wages, a prerequisite for phasing out his predecessor's controversial monetary stimulus. Reuters said.

"Given high economic uncertainty, the BOJ will communicate closely with the government and guide monetary policy flexibly," Ueda told reporters after meeting with Prime Minister Fumio Kishida to receive his official appointment letter.

Ueda also said he agreed with the prime minister that there was no immediate need to revise a joint statement between the government and the BOJ, under which the central bank pledges to achieve its 2% inflation target at the earliest date possible.

The 71-year-old academic's term began on Sunday, succeeding Haruhiko Kuroda, whose second, five-year term ended on Saturday. Ueda and his two deputy governors, Shinichi Uchida and Ryozo Himino, were to hold a joint news conference on Monday.

Markets will be looking for clues on how soon Ueda could phase out an unpopular bond yield control policy that has drawn criticism for distorting markets and hurting bank margins.

In parliamentary confirmation hearings in February, Ueda  stressed the need to keep ultra-easy policy to ensure Japan sustainably achieves the BOJ's 2% inflation target backed by wage growth.

But with inflation exceeding the target, many analysts expect the BOJ to tweak or end yield curve control (YCC), a policy combining a 0.1% target for short-term interest rate and a 0% cap for the 10-year bond yield, as soon as this quarter.

"The increasing side-effects are a sign the policy effect (of YCC) is working its way through the economy," former BOJ deputy governor Hiroshi Nakaso was quoted as saying in an interview with the Nikkei newspaper.

"When the appropriate timing comes, the BOJ's new leadership will likely modify or abolish YCC," he said.

Japan's long-stagnant inflation and wage growth are showing budding signs of change. After hitting a 41-year high of 4.2% in January, core consumer inflation remains above 3% as more firms hike prices in response to rising raw material costs.