TOKYO (AP) — Japan’s prime minister Shinzo Abe vowed to push ahead with more aggressive monetary easing as he nominated yesterday Haruhiko Kuroda to head the country’s central bank.
The current Bank of Japan governor, Masaaki Shirakawa, will step down on March 19, three weeks before his term is due to end. The nomination to parliament of 68-year-old Kuroda, an Oxford-educated former vice minister of finance, was widely expected. He is currently president of the Asian Development Bank. A vote on Kuroda’s appointment is due next month.
Abe is counting on Kuroda’s support to help Japan escape from a long, debilitating bout of deflation that he says is hindering consumer spending and corporate investment.
Bolder monetary easing is one of Abe’s “three arrows†or main strategies, for helping salvage the ailing economy.
In a speech to the parliament Thursday, Finance Minister Taro Aso pledged more drastic measures to help revive growth.
“Deflation is a deep-rooted problem that has undermined the Japanese economy†as it has “hampered investment toward the future,†said Aso, noting that Japan is not the only country grappling with weak demand and an aging population.
“As a pioneer, Japan should achieve the end of deflationary recession and present a solution to the world,†Aso said.
Kuroda has criticized central bank policies in the past. His perceived alignment with Abe’s views on the economy has added to worries that the Bank of Japan’s independence could be undermined. Central bank autonomy, which aims to ensure monetary policy decisions aren’t captive to the short-term considerations of political leaders, is enshrined in law in many countries. However the deep economic malaise that followed the 2008 financial crisis has resulted in many central banks, the US Federal Reserve in particular, accommodating calls for unprecedented monetary easing.
Along with Kuroda, the government proposed that Kikuo Iwata, a professor at Tokyo’s Gakushuin University, and Hiroshi Nakaso, an executive director at the BOJ, become the bank’s top two deputy governors.
Kuroda is viewed as part of the global “currency mafia†in Japan. With his long experience and fluent English, he is accustomed to dealing with the world’s major central banks and other financial leaders. During his years as Japan’s top financial diplomat, he often decried the Japanese yen’s rise against the US dollar, saying it did not reflect the fundamentals of the economy.
Despite frequent central bank interventions in the currency markets, the yen has strengthened significantly over the past decade thanks to its status as a safe-haven, and low interest rates that encouraged an international “carry trade†of borrowing in yen and using the money to invest in the bonds of countries with higher interest rates. In 2002, a dollar bought ¥130 compared with ¥80 in November last year before Abe’s election.
The prime minister’s advocacy of a weaker yen to help support Japanese export manufacturers has lifted share prices and spurred a decline in the value of the Japanese currency, which has weakened by about 20 percent against the US dollar since last fall.
The Nikkei 225 stock index Thursday jumped 2.7 percent to 11,559.36. The dollar was slightly higher at 92.37 yen.