USD/JPY Price Outlook: Japan’s PM Reveals Prerequisite for New BoJ Head
USD/JPY Price Outlook: Japan?s PM Reveals Prerequisite for New BoJ Head
The term of Bank of Japan Governor Haruhiko Kuroda will end in April 2023, and his successor is likely to be nominated soon. The appointment of a new leader will usher in policy adjustments that could affect the Japanese economy and the currency, and the market is closely watching for clues about whether the central bank can slow its stimulus.
Prime Minister Fumio Kishida says he wants to select the new BoJ head taking into account key qualifications, but he has yet to reveal any of those. In an interview with Nikkei newspaper Monday, he said that he wanted to pick a “person who has the most experience” and who will have a long-term vision for the future of the bank.
A BOJ official who has been a top aide to Kuroda, Masayoshi Amamiya, is considered one of the most likely candidates for the job. He has helped implement Kuroda?s policies, but his experience is in domestic monetary policy matters.
Another top candidate is former BOJ Deputy Governor Hirohide Yamaguchi, who was in charge of the central bank?s monetary policy operations until recently. He served as a key ally of Kuroda in the implementation of the bank?s “Abenomics” policy, which has included a mix of monetary easing and fiscal stimulus.
The BOJ is seen as a powerful political force in Japan and a new leader would be expected to strengthen its ties to the government, particularly with Abe, who has backed the bank?s monetary easing and is a senior member of the ruling party. But some members of the ruling party have expressed opposition to appointing a former aide to Kuroda, arguing that business as usual may not be possible if Okamoto is named.
Other candidates include former Finance Ministry officials Tokiko Shimizu and Yoshio Iwata, as well as former BOJ Executive Director and current vice president Masatoshi Nakaso. Both have been long-time central bankers and appear to have strong ties to the ruling party, but their experience is not as extensive as those of other contenders, including Amamiya and Yamaguchi.
Analysts say if Amamiya is selected, he will be unlikely to alter the BOJ?s stance on monetary policy, which he sees as the best way to achieve its 2% inflation target. However, some economists think that an end to the bank?s “yield-curve control” – which limits the yields of long-term government bonds to near-zero levels – could be part of a new approach.
Choosing an experienced career central banker who is not committed to reflation will give the government some flexibility, but it?ll also limit their options. If Amamiya is the new head of the BoJ, he will have to decide how to balance the need to keep the economy strong and growing with a desire to move to a higher inflation target.
In addition, choosing Amamiya would be a signal to investors that the government is willing to keep the central bank from straying too far away from its ultra-loose monetary policy. That would help keep the yen in check while the central bank is at a crossroads, as it prepares for an end to the zero-interest rate policy and increases its bond purchases.