New BOJ governor set to start stimulus soon

Monetary easing could start next month as more aggressive approach to tackling price falls looms

PUBLISHED : Saturday, 02 March, 2013, 12:00am
UPDATED : Saturday, 02 March, 2013, 5:27am

The Bank of Japan may add monetary stimulus as early as April as prospective governor Haruhiko Kuroda looks to demonstrate a more aggressive approach to tackling 15 years of falling prices.

Kuroda, the current Asian Development Bank president, will take office after governor Masaaki Shirakawa retires on March 19, if confirmed by Parliament following his official nomination on Thursday. Analysts at banks from Nomura to Mizuho Securities see more easing as soon as a meeting on April 3 and 4.

Given a jump in Japanese stocks and slide in the yen in recent months in anticipation of greater stimulus under the new leadership, any failure to move in April risks disappointing investors, ex-Bank of England banker Adam Posen said this week.

With a third consecutive fall in consumer prices in January showing the scale of his challenge, Kuroda may seek to adjust the timing, size and type of assets the Bank of Japan buys.

"The party has just started," said Masaaki Kanno, chief Japan economist at JP Morgan Chase in Tokyo, who in January predicted that Kuroda would get the job. "Give us more alcohol and get us excited - he will do that," Kanno said of Kuroda, predicting that the bank's open-ended bond purchases, scheduled to begin in January, will be brought forward to May or June.

The party has just started. Give us more alcohol and get us excited - he will do that

The analogy refers to a comment credited to former Federal Reserve chairman William McChesney Martin equating tighter monetary policy with removing the punch bowl at a party.

Prime Minister Shinzo Abe's administration will hold confirmation hearings from March 4, said Tsutomu Sato, acting chairman of the ruling Liberal Democratic Party's parliamentary affairs committee. The opposition Democratic Party of Japan, the largest party in the upper house, has signalled it will back Kuroda, despite a split parliament.

Abe nominated Kikuo Iwata, an economics professor who backs greater government oversight of monetary policy, and Bank of Japan executive director Hiroshi Nakaso for two deputy governor posts.

The Japanese currency was little changed yesterday after falling nearly 11 per cent against the US dollar in the past three months.

The Nikkei-225 Index edged lower after capping its longest monthly winning streak since 2006 on Thursday.

The yen's slide has bolstered confidence among some manufacturers, with Toyota raising its profit forecast to a five-year high. Hiroshi Tomono, the head of a steel industry group, told reporters yesterday that he expects the central bank to act quickly in tandem with the government.

Nomura economist Tomo Kinoshita sees a 10 trillion yen (HK$840 billion) increase in the bank's asset purchase programme as the most likely move.