Confirmed: ADB’s Kuroda to head Japan’s Central Bank

TOKYO, Japan – Japan’s parliament confirmed the appointment of Haruhiko Kuroda as Bank of Japan (BOJ) governor on Friday, March 15.

In Tokyo, Kuroda is a known as a critic of the bank, which he will soon lead. In Manila, he is best known as the head of the Asian Development Bank, a post he will be leaving now. And on the world stage, he is known to be on close terms with key players in global finance and central banking.

The real question now is if Kuroda will be able to turn around the BOJ, which Japan’s prime minster has criticized for being at the root of the country’s economic woes. He will be taking the helm at a troubled time, when Japan’s exports and domestic consumption have slowed down.

Kuroda is widely expected to usher in a new era for the BOJ as Tokyo demands more action to boost the world’s third-biggest economy.

Prime Minister Shinzo Abe nominated the 68-year-old Kuroda, a finance veteran likely to back the premier’s prescription of big spending and aggressive monetary easing to drag Japan out of years of deflation, which have decreased private and corporate spending.

During parliamentary confirmation hearings, Kuroda vowed that he would do “everything possible” to reverse years of falling prices, while criticizing previous BOJ administrations for failing to fix the problem.

Lashing out at the BOJ

Kuroda has been a stern critic of the BOJ, and a vocal supporter of Prime Minister Shinzo Abe’s call for aggressive easing and the setting of a two-percent inflation target, which the central bank adopted in January.
The next BoJ governor, who will officially take office on Wednesday, also defended Abe’s use of monetary policy to weaken the yen to help Japan’s exporters.

He took advantage of the confirmation hearings to once again hit out at the BoJ for not doing enough to tackle Japan’s long-running deflation problem.
“There has never been a developed nation that has suffered deflation for 15 years — it is abnormal,” Kuroda was quoted as saying.

“The duty to stabilize prices rests with central banks,” he added.

Kikuo Iwata, an economics professor at Tokyo’s Gakushuin University, will serve as one of Kuroda’s deputy governors and is also known for criticizing the BOJ.
Iwata has long pushed for the BOJ to boost its easing efforts to turn around Japan’s lumbering economy, and favors giving Tokyo more control over the central bank, a touchy subject at the independent institution.

International ties

Kuroda, who graduated from the University of Tokyo and earned a master’s degree from Oxford University, speaks English fluently and has the kind of management experience, including his stint at the ADB, that has won him the approval of Japan’s business community.

Analysts have said Abe is hoping Kuroda’s connections and English fluency will help him communicate Tokyo’s economic stimulus plans overseas.

He will need to be diplomatic to tackle accusations that Japan is deliberately weakening the yen to help exporters. The yen could drop further if Kuroda eases monetary policy, which he is expected to do.

Yen dips after confirmation

The yen eased a tad after Japanese lawmakers gave final approval to the government’s nominees to take the helm at the Bank of Japan, with many already anticipating more aggressive monetary easing.

Still Asian markets were mostly higher after the news, following another strong lead from Wall Street, where traders took heart from more upbeat US jobs numbers.

Focus will now be trained on the bank’s next policy meeting next month to see what tools the new leadership will use to jumpstart the Japanese economy and drag it out of deflation. – with reports by Katherine Visconti/Rappler.com