BOJ appoints ‘Mr. YCC’ to oversee monetary policy

By Takahiko Wada and Leika Kihara

TOKYO (Reuters) – The Bank of Japan on Monday appointed Seiichi Shimizu, whose market and technical expertise on the bank’s yield curve control (YCC) policy earned him the name “Mr. YCC”, as an executive director in charge of monetary policy.

The appointment of Shimizu comes at a time the central bank seeks a smooth exit from the bond yield control policy, which is drawing criticism for distorting bond market pricing and crushing commercial banks’ margin.

Shimizu, who is already among the BOJ’s six executive directors, takes over the task of overseeing monetary policy from Shinichi Uchida, who became deputy governor on Monday.

During his stint as head of the financial market department, the 57-year-old career central banker oversaw big changes in market operations made when the bank adopted YCC In 2016.

As head of the elite monetary affairs department, he helped compiled a package of steps to mitigate the side-effects of YCC in 2021 such as phasing out its huge buying of risky assets.

“As YCC nears its limit, it’s ideal to have someone like Shimizu take on the role of containing the side-effects of the policy,” said Mari Iwashita, chief market economist at Daiwa Securities.

Shimizu also negotiated with overseas counterparts on steps to calm investors when the COVID-19 pandemic jolted marktes in 2020 – a skill likely to come in handy as fears of a global banking sector crisis unsettle markets.

“The BOJ will probably have to scrutinise how much the crisis could spread,” said Izuru Kato, chief economist at Totan Research. “If it sees the chance of a contagion as limited, the central bank could move towards tweaking YCC.”

The executive directors, which report to the nine-member board, divide up the task of overseeing the central bank’s various day-to-day operations including monetary policy, financial market affairs and international liaison.

Uchida and former banking regulator head Ryozo Himino formally assumed the BOJ’s deputy governor posts on Monday, succeeding Masayoshi Amamiya and Masazumi Wakatabe.

Incoming governor Kazuo Ueda will join the BOJ when incumbent Haruhiko Kuroda’s term ends next month.

Many analysts expect the BOJ to tweak or end YCC during Ueda’s five-year rein, as the bank’s huge bond buying to defend its yield cap faces criticism for distorting the shape of the yield curve and draining bond market liquidity.

(Reporting by Takahiko Wada and Leika Kihara; Editing by Sam Holmes)