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Gov’t nominates BOJ chief Kuroda, 2 new deputies to drive Abenomics

  • February 16, 2018
  • , Kyodo News , 7:54 p.m.
  • English Press
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TOKYO — The government presented to the Diet on Friday its proposal to reappoint Bank of Japan Governor Haruhiko Kuroda for another five-year term, in a show of confidence in his ultra loose monetary policy aimed at reviving the deflation-mired economy under the “Abenomics” policy mix.


The government also nominated BOJ Executive Director Masayoshi Amamiya, seen as playing a critical role in crafting Kuroda’s aggressive easing policy, and Waseda University professor Masazumi Wakatabe as BOJ deputy governors.


The reappointment of the BOJ chief — the first for a second full term in more than half a century — would signal the central bank is set to continue its stimulus measures as a key part of Prime Minister Shinzo Abe’s economic policies that also include fiscal stimulus and structural reforms.


Both houses of the Diet need to approve the nomination of Kuroda for another term through 2023, which could make him the longest-serving governor of the central bank.

At other major central banks in recent history, Alan Greenspan served as chairman of the U.S. Federal Reserve for over 18 years between 1987 and 2006.


The ruling bloc of the Liberal Democratic Party and Komeito party controls the chambers and as the selection of the top posts is expected to spark no strong opposition from other parties, the nominees will likely be approved without major conflict.


Many BOJ watchers and analysts have expected Kuroda, a 73-year-old former Finance Ministry official and president of the Asian Development Bank, to stay on for another term.


The BOJ is expected to diverge further from the Fed and the European Central Bank, which are beginning to scale back monetary stimulus.


Chief Cabinet Secretary Yoshihide Suga praised Kuroda for taking the lead in carrying out bold “quantitative and qualitative” easing and trying to create a situation that is not deflationary during his tenure.


“We judged it most appropriate to entrust Governor Kuroda with guiding monetary policy,” he said at a press conference.


The new lineup suggests the Japanese central bank will not be in a hurry to weigh an exit from its crisis-mode monetary policy as Kuroda himself has said it is “too early” to discuss it. Wakatabe, 52, is also known as a reflationist who favors proactive monetary easing.


Wakatabe is an advocate of fiscal stimulus. He has said in an interview with Kyodo News that the BOJ has failed to attain the inflation target as consumption took a hit after the 2014 sales tax hike.


Veteran central banker Amamiya, 62, has been working closely with Kuroda in recent years and some analysts say he now stands a higher chance of becoming one of the candidates to lead the BOJ in the future.


Kuroda said Friday the BOJ’s monetary easing has helped the economy improve “greatly.” But he acknowledged that the 2 percent inflation target is still far off.


“The most important thing for the BOJ is to attain this goal and I believe it’s important to continue with the current powerful monetary easing,” he said during a parliamentary session.


Potentially complicating the BOJ’s efforts to jolt the economy out of deflation, however, the yen has been rising, particularly against the U.S. dollar amid concerns about higher inflation and interest rates in the United States.


Once approved, Kuroda will be the first BOJ governor to serve a second term since Masamichi Yamagiwa, who assumed the post between 1956 and 1964.


Kuroda’s current term expires in April and those of the current deputy governors, Hiroshi Nakaso and Kikuo Iwata, will end March 19.


Kuroda took over the post in 2013 from his predecessor Masaaki Shirakawa, who stepped down before the expiration of his full term.


Since then, a series of radical steps have been taken including stepped-up purchases of Japanese government bonds and the first negative interest rate policy in Japan under his policy called the “Kuroda bazooka.”


Its drastic easing measures weakened the yen, which has helped Japan Inc. to reap record earnings and send stocks sharply higher. Japan is now in its second-longest postwar economic expansion cycle in what is known as synchronized global economic growth.


But Kuroda has had to delay the time frame for attaining its 2 percent inflation target six times.


Concerns have also grown about the adverse impact of its prolonged monetary easing on the financial system, squeezing the profitability of small and regional banks.


Under the current framework of yield curve control, the BOJ sets a short-term policy rate of minus 0.1 percent and buys government bonds to guide the 10-year yield to around zero percent.


The BOJ owns some 40 percent of outstanding Japanese government bonds, which critics say would loosen fiscal discipline and make it difficult for the central bank to shrink its swelling balance sheet.

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