By Leika Kihara and Takahiko WadaTOKYO, Feb 15 (Reuters) – Incoming Bank of Japan (BOJ) governor Kazuo Ueda will probably end its yield control policy when the timing is right to fix the central bank’s strained communications with markets, former BOJ executive Kazuo Momma told Reuters on Wednesday.But the BOJ must make clear that any decision to scrap yield curve control (YCC) would be purely aimed at fixing what has become an unworkable framework, not at exiting ultra-loose monetary policy, Momma said.”Central bank communication has become very difficult under YCC,” Momma said, pointing to the difficulty of controlling the 10-year bond yield at a set level for a prolonged period.”I think he’ll seek the right timing to abandon YCC,” Momma said of Ueda, a 71-year-old academic who was nominated by the government to succeed incumbent governor Haruhiko Kuroda when his term ends in April.With inflation exceeding its 2% target, the BOJ has seen its yield cap set under YCC come under attack from markets betting on a near-term interest rate hike.Any advance hints of a change to the 10-year yield target would unleash a huge bond sell-off by investors seeking to profit or minimise losses from such a decision, Momma said.That means the BOJ is forced to wrong-foot markets each time it tweaks YCC, resulting in a loss of investors’ trust over central bank communication, he said.Because of that, Ueda is likely to maintain ultra-loose policy until the BOJ’s 2% inflation target is sustainably met, but would eventually end YCC to address such flaws, Momma said.”The BOJ must restore market trust over its communication,” something Ueda can pull off with his “great communication skills,” said Momma, who has experience working with him when Ueda was a BOJ board member from 1998 to 2005.In abandoning YCC, the central bank can ditch the 10-year yield target, but keep guiding short-term interest rates at -0.1% and pledge to maintain the level until 2% inflation is stably achieved, Momma said.Story continuesThe BOJ can also promise to ramp up government bond buying to avoid any spike in long-term interest rates, he added.While Ueda could make such a tweak as early as his first policy meeting in April, he could opt to wait if he feels the public and markets aren’t ready for the change, said Momma, who is currently executive economist at private think tank Mizuho Research & Technologies.”If he feels that abandoning YCC now won’t gain the public’s understanding, he’ll wait for as long as necessary to ensure the public is ready,” he added.A soft-spoken academic with a PhD from the Massachusetts Institute of Technology, Ueda is seen as a pragmatic academic who will be driven by economic data in deciding monetary policy.Upon parliament’s approval of his nomination, Ueda will chair his first policy-setting meeting on April 27-28. (Reporting by Leika Kihara and Takahiko Wada; Editing by Sam Holmes)

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