BOJ successor linked to “getting out of monetary easing”

International Business News  –  In view of Japan’s Liberal Democratic Party’s great victory in the Senate election and continuing to govern jointly with the Komeito Party, Prime Minister Fumio Kishida will fully start the selection of the successor of the central bank governor Kuroda Haruhiko (77 years old). Kuroda’s tenure in office has continued to update the longest record in history. If he resigns on April 8 next year, it will exceed 10 years. Shortly after taking office, Kuroda continued to pursue a large-scale monetary easing policy to support the economy, but the side effects of the policy were manifested in the form of the worst yen depreciation against the dollar in about 24 years and rising prices. Whether those who are positive about getting rid of the easing policy are selected as successors has become the focus of attention in the future.

The BOJ Law stipulates that the Governor shall be appointed by the Cabinet with the consent of the House of Representatives and the Senate. Both chambers are currently dominated by the ruling parties of the Liberal Democratic Party and the Komeito Party, so there is a high probability that the governorship proposal put forward by the Kishida government will be approved. The candidates include Masayoshi Amamiya (66), the current vice governor who was deeply involved in establishing the large-scale easing policy, and Hiroshi Nakaseng (68), a former vice governor of the international faction who has established strong connections with central bank executives in various countries. There are also candidates from the same Ministry of Finance as Kuroda.

As a measure of large-scale monetary easing, the central bank bought a large amount of government bonds issued for borrowing and kept the long-term interest rate ceiling at “about 0.25%”. Kuroda said that until the economic situation improves and wages grow at a higher rate than prices, “we will persistently pursue monetary easing”. Kishida said at the party head discussion for the Senate election that revising monetary policy would lead to an increase in interest rates and “have a big impact on the economic situation”, and fully supported Kuroda’s approach.

Former Prime Minister Shinzo Abe, who was working with Kuroda to promote “Abe Economics”, an economic policy centered on monetary easing, was shot and killed while giving a speech on the street. Because Abe, as the leader of the largest faction of the LDP, also has great influence on the economic policies of the Kishida government, a market source believes that “Kishida has become more likely to take the lead in the personnel of the governor of the central bank.”

The reason for the depreciation of the yen is that compared to the central banks in Europe and the United States, which have raised interest rates to curb price increases, Japanese interest rates are low and the yen is considered unfavorable for asset use. Hideo Hayakawa, a former director of the central bank, pointed out that “inflexible policy use has led to the accelerated depreciation of the yen.” Among market stakeholders, many views that the change of governor of the central bank is a good opportunity to modify monetary policy.