Bank of Japan Governor Haruhiko Kuroda is expected to be reappointed for another five-year term, as Prime Minister Shinzo Abe appears to be comfortable with the current path of monetary policy.
Kristian Rouz — Japanese Prime Minister Shinzo Abe is reportedly set to reappoint Bank of Japan (BoJ) Governor Haruhiko Kuroda for a second term, as his job fighting the threat of disinflation isn’t deemed over. The move is said to be inspired by the prime minister’s confidence in Kuroda as an efficient monetary policy manager, whose policies are important to promote GDP growth.
The expected move would keep Kuroda as BoJ Governor till 2023, allowing him to achieve the 2-percent inflation target, whilst supporting the Prime Minister’s pro-growth policies known as “Abenomics.”
According to sources, no final decision on Kuroda’s reappointment has been made as of yet, as time is running short until Kuroda’s current term expires in April. The move would strengthen the positions of monetary policymakers favoring the extended stimulus, including the negative interest rates regime — known as NIRP.
“From the beginning, there’s been no other choice but to reappoint Governor Kuroda,” senior BoJ officials reportedly said Saturday, according to the Japanese media.
Kuroda’s main achievements during his first term include a steady GDP expansion, a rally in the nation’s main stock index Nikkei Stock Average, and better employment conditions, as well as indirect positive consequences of Kuroda’s policies.
These, in turn, include a weaker yen and higher competitiveness of Japanese exports on the global market, and an increase in domestic manufacturing output, as well as higher wages and a stronger consumer sentiment.
“At the moment, I think the market is pricing in an 80-90 percent chance that Mr. Kuroda will be reappointed,” Masamichi Adachi of JP Morgan in Tokyo said.
Additionally, the Abe cabinet is set to promote the BoJ’s Executive Director Masayoshi Amamiya to the Bank’s Deputy Director, according to an unverified report from the Jiji news agency. There are only two deputy directors at the Japanese central bank.
In the recent years, Amamiya was responsible for drafting the most innovative monetary policies implemented by the BoJ, including its asset-purchasing program (known as quantitative easing, or QE) and yield-curve control.
Whilst the Japanese QE has been a local take at the globally widespread practice of central bank asset-buying, the yield-curve control is an even more unconventional solution, allowing it to avert the risk of recession. The policy encourages private investment in short-term bonds and the non-financial sector, whilst suppressing investor urge to allocate capital in safe-haven assets.
“I think Mr. Abe is comfortable with the current policy,” Takeshi Yamaguchi of Morgan Stanley in Tokyo said.
Amamiya’s relationship with members of the Japanese parliament, as well as government officials, promoting his unconventional monetary solutions has earned him the professional nickname “Amamiya magic.”
Governor Kuroda’s team is recognized for its effort of spurring inflation and domestic investment over the past five years, allowing the Abe cabinet to focus on the measure of fiscal regulation, and ensuring a more predictable economic environment.
Still, opposition lawmakers might challenge Kuroda’s reappointment, as they see him as a close ally to PM Abe, which might impair the BoJ’s independence. Some lawmakers reportedly favor Prof. Masazumi Wakatabe of Waseda University and Prof. Takatoshi Ito of Columbia University in New York — who are known as prominent advocates for pro-inflation policies.