Japan parliament approves Kuroda as BoJ chief
Japan’s parliament on Friday approved a new central bank management team that is widely expected to back government demands for more policy action to stoke the world’s third-biggest economy.
The upper house gave the green light to Haruhiko Kuroda as Bank of Japan governor, with the finance veteran and long-time BoJ critic seen as likely to launch aggressive monetary easing measures, after his predecessor drew heavy criticism for failing to turn around Japan’s fortunes.
Lawmakers also approved Kikuo Iwata and Hiroshi Nakaso as Kuroda’s deputies, with all three clearing the vote hurdle by comfortable margins despite warnings from Japan’s leading opposition that it opposed Iwata.
The university economics professor is a strong supporter of monetary easing and of giving Tokyo more control over the BoJ, a touchy subject at the independent central bank.
The BoJ’s new management team, which was approved by the lower house on Thursday, is set to take up their positions next week with the focus now squarely on their first policy meeting next month.
“High hopes are resting on the ability of the Bank of Japan’s new leadership to revitalise the economy,” London-based Capital Economics said in a note.
Prime Minister Shinzo Abe nominated the 68-year-old Kuroda, viewing him as a kindred spirit likely to back the premier’s prescription of big spending and aggressive monetary easing to drag Japan out of years of deflation which has crimped private spending and corporate investment.
Kuroda has vowed he would do “everything possible” to reverse years of falling prices, while criticising previous BoJ administrations for failing to fix the problem.
The yen strengthened slightly in minutes after Friday’s vote.
The unit has been under pressure for months on easing speculation after Abe’s administration swept to power in landslide December elections, pledging to fix the economy and install like-minded leadership at the Bank of Japan.
Kuroda, who has announced his resignation as head of the Manila-based Asian Development Bank, may have limited options, however, after the BoJ in January announced the launch of an unlimited easing programme and the adoption of a two-per cent inflation target.
The BoJ’s asset purchase policy is similar to the US Federal Reserve’s unlimited monthly bond-buying scheme, known as quantitative easing.
Kuroda’s proposal to buy longer-maturity assets and bring the unlimited asset-purchase plan forward underwhelmed markets.
The new BoJ chief has also ruled out purchases of foreign bonds to stoke the economy, as Japan faced criticism from abroad it was engineering a yen devaluation, and risking setting off a global currency war.
Such purchases would require selling huge amounts of yen to buy foreign debt, a move that would likely further weigh on the unit’s value.
The outspoken Abe clashed with Shirakawa on policy matters, previously warning that he might change a law guaranteeing the bank’s independence if it did not follow his policies, stirring protests from central bankers abroad.
On Friday, Shirakawa took a jab at expected plans for more BoJ easing, saying that pumping more money into the banking system alone would not push up prices without structural changes to the economy.
“It’s like punching the air,” he was quoted by Dow Jones Newswires as saying.
Also Friday, Japan’s government upgraded its assessment of the economy for the third straight month in March, good news after revised growth data showed the country eased out of recession in the last quarter of last year.
While markets have cheered Abe’s plans, the job ahead for Japan’s premier and the BoJ remains formidable with exports weak and factory output unsteady.