TOKYO – Prime Minister Shinzo Abe is preparing to nominate Asian Development Bank President Haruhiko Kuroda to head Japan’s central bank and help spearhead moves to revive growth in the world’s third-biggest economy, local reports said Monday.
The current Bank of Japan governor, Masaaki Shirakawa, will step down on March 19, three weeks before his term ends. Abe intends to formally propose his replacement to parliament this week so as to allow a smooth succession, said government spokesman Yoshihide Suga.
Suga would not confirm the reports that Kuroda is the leading candidate, saying there was no official decision yet.
“The key is to return to the bold monetary policies advocated by the Abe administration,” Suga told reporters. “We need to create an environment in which we can pursue those Abe policies.”
Kuroda, 67, is an Oxford-educated former vice minister of finance who has been critical of the central bank’s policies in the past and is thought to back Abe’s strategies for seeking to revive Japan’s economy by fighting deflation through monetary easing and hefty government spending.
Kikuo Iwata, a professor at Tokyo’s Gakushuin University, and Hiroshi Nakaso, an executive director at the BOJ, are due to become the bank’s top two deputy governors, the reports said.
During his years as the country’s top financial diplomat, Kuroda often objected to the yen’s protracted rise against the U.S. dollar, saying it did not reflect the fundamentals of the economy.
As head of the Manila, Philippines-based regional lender ADB, he has sought to balance the bank’s mission of poverty mitigation with Asia’s economic ascent and growing financial heft. He also often has urged China to ease foreign exchange controls that link the Chinese yuan to the U.S. dollar.
In Manila, ADB spokeswoman Harumi Kodama said “the selection of the candidate for governor of the Bank of Japan is really a decision for the government of Japan so ADB is really not in the position to provide any comment.”
Despite frequent central bank interventions in the currency markets, the yen continued its long-term ascent 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.
Abe’s support for a weaker yen has lifted share prices and spurred a further decline in the value of the Japanese currency, which has weakened by about 20 per cent against the U.S. dollar since last fall.
The benchmark Nikkei 225 stock index surged 2.4 per cent to 11,662.52 on Monday. The yen was trading near 94.25 to the U.S. dollar, after sliding to a more than three-year low of 94.71 earlier in the day.
Since taking office in late December, Abe has pushed through a raft of policies aimed at helping Japan escape from recession through heavy public works spending and other measures meant to restore sustainable growth. Japan’s economy is struggling with the aftermath of the 2011 natural and nuclear disasters, rapid aging of its population and the biggest public debt burden among leading industrial economies.
After months of lobbying by Abe, even before the Liberal Democrats took power following a landslide win in a Dec. 16 election, the Bank of Japan joined with the government in setting a 2 per cent inflation target. So far, massive asset purchases by the central bank and years of near-zero interest rates have done little to boost investment or hiring by corporations put off by slack domestic demand.
“Japan needs something dramatic to happen. They are stuck,” said David Harvey, director of the Canberra, Australia-based consultancy Asia Financial Group. He described Kuroda as a “smart cookie.”
Shirakawa has chafed at Abe’s pressure for more aggressive action from the central bank, and Abe’s strong stance on monetary policy has raised concern he may be violating the Bank of Japan’s autonomy.