By Leika Kihara and Takahiko Wada
TOKYO (Reuters) - The Bank of Japan's expected next governor Kazuo Ueda likely won't rush to overhaul ultra-loose policy and will instead let economic data guide the exit timing, said Tetsuya Inoue, who was Ueda's staff secretary when he was a central bank board member.
Markets are closely watching for hints on the policy stance of Ueda, a 71-year-old academic who the government is likely to appoint as successor to Governor Haruhiko Kuroda when his term ends in April.
During his stint as BOJ board member from 1998 to 2005, Ueda played a key role in introducing new monetary easing tools to combat a domestic banking crisis and debilitating deflation.
Inoue, a senior researcher at Nomura Research Institute who knows Ueda from his time as his staff secretary from 2000 to 2003, said he does not belong to any economic camp that could be explicitly described as dovish or a hawkish.
"His style is to discuss monetary policy based on facts and evidence," Inoue told Reuters in an interview on Monday.
"He won't rely on a single model because he knows that economic and price developments are very complex. Rather, he uses economic theories as tools to conduct policy flexibly."
In contrast to Kuroda, who deployed massive stimulus shortly after becoming governor in 2013, Ueda likely won't rush into overhauling policy as he will have time to gauge whether inflation and wages will keep rising, Inoue said.
"Unlike Kuroda, Ueda won't immediately turn things around after assuming the post. That's not his mandate," said Inoue.
"He'll likely let economic data guide policy decisions."
A holder of an economics PhD degree from the Massachusetts Institute of Technology (MIT), Ueda helped the BOJ introduce forward guidance in 1999 - a little known concept back then in which central banks commit to keeping ultra-low interest rates in hope of curbing rises in longer-term rates.
Since then, forward guidance has become widely used among global central banks.
If he were to become governor, Ueda could introduce a new monetary policy framework that could include a revamped type of forward guidance, Inoue said.
In a book published in 2005 reflecting on the BOJ's battle with deflation, Ueda said Japan's then crippled banking system had hampered the stimulus effects of ultra-low interest rates.
After the 2008 collapse of Lehman Brothers, global policymakers have become more aware of the damage banking-sector problems could inflict on their economies, Inoue said.
"If he were to become governor, Ueda will likely put emphasis on maintaining financial system stability," he added.