Bank of Japan Governor Kazuo Ueda’s road to policy normalization got a lot bumpier after last week’s market shocks, leaving him facing multiple risks.
When he took over at the BOJ in April 2023, Ueda inherited a complex monetary framework that seemed nearly impossible to abandon. After more than a decade of unconventional monetary easing, the bank controlled more than half of the Japanese government bond market. And yet, after ending the last negative rate in March, Ueda appeared to be moving smoothly toward normalization.
Then, within days of a second hike on July 31, markets erupted in volatility. While many traders blamed the BOJ for fueling global market volatility by telegraphing further hikes, Vice Governor Shinichi Uchida stepped in to assure investors that the central bank will not raise rates as long as market instability persists.
