Bank of Japan’s ‘bazooka-wielding’ Kuroda nominated for second term
AFP – Japan’s government nominated Haruhiko Kuroda for a second term as central bank governor on Friday, handing the veteran finance chief more time to battle deflation and kick-start the world’s number-three economy.
Kuroda’s nomination was among those submitted to the parliament in a document seen by reporters, and had been widely expected.
Handpicked by Shinzo Abe to steer the former economic powerhouse out of a dangerous cycle of falling prices, Kuroda has guided the key monetary plank of the prime minister’s vaunted "Abenomics" economic policy.
Now 73, the ex-president of the Asian Development Bank (ADB) is on course to become the longest-serving Bank of Japan (BoJ) governor ever if he completes his second five-year term.
Kuroda took the helm in March 2013 with a mandate to deploy what was called a monetary "bazooka" to stoke life into the moribund Japanese economy.
He has overseen a policy of ultra-aggressive monetary easing, adopting in January 2016 the BoJ’s first-ever policy of negative interest rates, effectively charging lenders to park their cash at the central bank.
The BoJ has also pledged to keep the yield on 10-year government bonds around zero by buying as many as necessary.
A perennial optimist in the long-running war against deflation, Kuroda once famously invoked the spirit of Peter Pan, the boy who never grew up.
"I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it’," he said in a 2015 speech about monetary policy.
"Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions," he said.
– ‘Some distance to go’ –
However, it takes more than a bullish attitude to tame deflation and Kuroda has failed in his mission to hit the inflation target of two percent — the most recent figure was 0.9 percent in December.
But he can point to more success recently on the GDP front, with Japan currently enjoying its longest unbroken spell of quarterly growth since the bubble days of the late 1980s.
Kuroda must still win parliament approval and faces hearings as soon as next week.
He will likely come under fire from some opposition lawmakers, who say the government’s massive bond purchases have left the country vulnerable, and that the BoJ’s negative interest rate policy hurt the profitability of banks.
Critics also charge that his monetary easing has pushed down the value of the yen, making the recovery too export-led.
Market experts say that with inflationary shoots beginning to spring forth and the economy picking up, Kuroda’s greatest future challenge will be to exit the easing policy.
For now, Kuroda has pledged to stay the course.
"Our country’s economy is gradually expanding but on the other hand price movements are weak," he told parliament on Friday, shortly before his nomination was announced.
"Considering there is some distance to the two percent price-stabilisation target, it’s not the time… for an exit from government bond-buying."
"The Bank of Japan needs patiently to continue the current powerful monetary easing," he added.
Economists said the government was sticking with a safe pair of hands at a time when other global central banks are weighing how to move safely away from ultra-loose monetary policy crafted from the ruins of the subprime mortgage crisis.
His reappointment "implies an emphasis on ‘continuity’ over ‘change’ in policy conduct, ahead of the government’s expected declaration of an end to deflation around mid-year, and ‘stability’ over ‘volatility’ in the financial markets," Tetsufumi Yamakawa of Barclays Securities said in a report.
Kuroda has long been a man for a tight spot.
During the Asian currency crisis of the late 1990s, he was instrumental in drafting the so-called Miyazawa Initiative, a 30-billion-dollar financial rescue package for struggling southeast Asian economies.
Kuroda, who holds degrees from the University of Tokyo and the University of Oxford, spent decades in the Japanese finance ministry and took the top job at the Manila-based ADB in 2005.
He speaks fluent English and has the kind of management experience, including his stint at the ADB, that has also won the approval of Japan’s business community.