The Bank of Japan may pack a bigger punch under Haruhiko Kuroda, an opponent of deflation who ran the nation’s currency policy and then built an international reputation leading the Asian Development Bank.
Japanese Finance Minister Taro Aso told reporters yesterday that Kuroda, 68, would be a “correct” choice as the next BOJ chief and noted his background in international finance. Two people familiar with the discussions earlier said Kuroda is Prime Minister Shinzo Abe’s pick for the post. Kuroda was in charge of foreign-exchange issues at the Ministry of Finance from 1999 to 2003.
While outgoing Governor Masaaki Shirakawa established a 76 trillion yen ($808 billion) asset-purchase fund and an unlimited bank-loan financing program, he failed to encourage inflation expectations, instead warning repeatedly about the dangers of excess stimulus. By contrast, Kuroda called for an inflation target a decade before the bank adopted one in January, and for years has spoken in favor of quantitative easing.
“He’s the right person to enhance the role of communication strategy at the Bank of Japan,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo and a former head foreign-exchange dealer at the BOJ. “He has already said in press interviews that the 2 percent inflation target should be achieved in two years -- this is a very important message to the market.”
Investors welcomed the nomination reports, with the yen yesterday reaching its lowest against the dollar since May 2010 on prospects for more stimulus. Japan’s benchmark Nikkei 225 Stock Average closed at the highest in almost 4 1/2 years. Five- year bond yields fell to a record 0.12%, amid forecasts the BOJ will start purchasing longer-dated securities.
Heading the BOJ would cap a 45-year-career that includes a secondment to Washington with the International Monetary Fund, a stint as adviser to former Prime Minister Junichiro Koizumi and a master’s degree from Oxford University.
Born on the southern island of Kyushu in 1944, Kuroda entered the Ministry of Finance in 1967 after graduating from the University of Tokyo with a degree in law. As a young bureaucrat, he was sent to Oxford, where he studied economics under Nobel Prize winner John Hicks.
Kuroda said in a 2006 interview with the IMF that at Oxford he was taught “although economic theory may provide some insight, some framework, good policies may require something that goes beyond just economy theory or analysis -- some practical judgment, some good sense.”