By | February 16, 2018
BOJ Keeps Stimulus Unchanged Ahead of New Term for Kuroda - Bloomberg

TOKYO—Prime Minister Shinzo Abe’s government on Friday nominated Bank of Japan Gov. Haruhiko Kuroda to a new five-year term, a move that indicates monetary conditions will be kept ultra-loose for now.

Mr. Kuroda, in office since 2013, will face new challenges in his next term after recent turbulence in global stock markets and a sharp rise in the yen since the beginning of 2018, which threatens the profits of Japanese exporters. The yen on Friday rose further, to around 106 to the U.S. dollar—its highest level since November 2016.

Mr. Kuroda repeatedly said in parliamentary testimony over the past two weeks that the bank would continue pursuing “powerful easing.” He also said it was too early to talk about a potential exit from that policy—a contrast with the Federal Reserve, which has steadily raised U.S. interest rates since December 2015.

Yet such statements have had little impact on the dollar’s tumble recently against the yen and other major currencies, which some market players attribute to concern about inflation and budget deficits in the U.S.

The nomination requires the approval of Parliament, and is expected to receive it as Mr. Abe’s coalition controls a majority of both chambers.

The 73-year-old was handpicked by Mr. Abe as the linchpin of the prime minister’s Abenomics plan to reinvigorate Japan’s long-sluggish economy. In April 2013, Mr. Kuroda launched what analysts and investors called a “bazooka” of monetary easing focused on large purchases of government bonds and other unconventional steps.

In 2014, he was close to fulfilling his promise of achieving 2% inflation within two years. But an economic slowdown intervened, triggered by an increase in the national consumption tax. Sharp falls in oil prices also kept a lid on inflation.

He has since experimented with new easing ideas, including negative interest rates introduced in early 2016. Later that year, he introduced what he called yield-curve control, trying to fix short and long-term interest rates. Since that time, the BOJ has targeted a zero yield on 10-year government bonds.

Still, inflation remains below 1%, and the target date for reaching 2%—already delayed six times—now stands at March 2020.

One focus of Mr. Kuroda’s next term will be the changing dynamics of the BOJ’s nine-member policy board. The government on Friday nominated two people as deputy governors to serve on the board, including Masazumi Wakatabe, an economics professor at Waseda University known as an advocate of radical easing.

In a December interview with the Nikkei business daily, Mr. Wakatabe said the BOJ should step up purchases of government bonds to ¥90 trillion ($850 billion) per year from the bank’s current guidance of ¥80 trillion.

The actual pace has fallen below the guidance, coming in at around ¥55 billion in the most recent 12-month period.

Mr. Wakatabe’s nomination signals that the government wants “to keep early exit policy debate in check,” said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

The other new deputy governor is set to be Masayoshi Amamiya, a career BOJ official who has helped Mr. Kuroda design key policies.

Write to Megumi Fujikawa at

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