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Japan parliament OKs BOJ chief Kuroda’s reappointment, new deputies

  • March 16, 2018
  • , Kyodo News , 1:14 p.m.
  • English Press

Japan’s parliament on Friday approved the nomination of Bank of Japan Governor Haruhiko Kuroda for another term and of two new deputies, a lineup widely expected to keep in place powerful monetary easing as inflation is still distant from the bank’s 2 percent target.

 

BOJ Executive Director Masayoshi Amamiya, who has played a critical role in crafting Kuroda’s aggressive easing policy, and Waseda University professor Masazumi Wakatabe, seen as a reflationist, will serve as deputy governors for five years.

 

Kuroda, 73, is a former Finance Ministry bureaucrat who later headed the Asian Development Bank. A further five-year term would make him the BOJ’s longest-serving chief.

 

The nominations were approved by the House of Representatives in the afternoon after the House of Councillors gave the nod in the morning.

 

Kuroda faces the formidable challenge of guiding monetary policy, and communicating it to financial markets as many economists expect the BOJ to lag behind the U.S. and European central banks in policy normalization.

 

During a confirmation hearing in early March, Kuroda said it would be “natural” to consider and debate an exit from monetary easing around 2019 when the BOJ expects inflation to reach 2 percent, sending the yen and bond yields higher.

 

Kuroda took the helm at the BOJ in 2013 and subsequently carried out steps called the “Kuroda bazooka.” As one of the so-called three arrows of “Abenomics,” the economic recovery program undertaken under the leadership of Prime Minister Shinzo Abe, the BOJ took aggressive action to stimulate the world’s third-largest economy through ultra-easy monetary policy.

 

The central bank expanded purchases of Japanese government bonds and introduced the country’s first negative interest rate policy.

Such drastic easing measures weakened the yen and helped Japan Inc. to reap record earnings, which consequently sent the Tokyo stock market higher.

 

Under the current framework called yield curve control, the BOJ focuses on interest rates. It 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.

 

Japan’s economy now enjoys its second-longest postwar expansion cycle and yet the BOJ has been forced to delay its estimate for hitting the 2 percent inflation target six times. Inflation remains stubbornly low as Kuroda himself has said a “deflationary” mindset among households and companies persists.

 

The BOJ has gobbled up roughly 40 percent of Japanese government bonds, focusing attention on how it will shrink its swollen balance sheet when it decides to engineer an exit when the time comes.

 

Critics have expressed concern about the adverse impact of prolonged monetary easing on the financial system and profitability at regional banks.

 

Amamiya, 62, one of Kuroda’s new deputies, has told parliament that the BOJ has the tools to end its ultra-loose monetary policy without disrupting financial markets.

 

The other deputy governor Wakatabe, 53, has sounded cautious about seeking an exit prematurely, and said the BOJ should consider additional easing if attaining the 2 percent inflation target remains elusive.

 

“We need to avoid the risk of returning to deflation” by seeking an exit prematurely, Wakatabe said during his confirmation hearing on March 5.

 

The core consumer price index rose 0.9 percent in January from a year ago, according to the most recent government data.

Japan’s two chambers need to approve the government’s nominees for key posts.

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