Sunday marked three years since Haruhiko Kuroda was appointed the governor of the Bank of Japan, during which time Kuroda has continued to state that he will “do everything possible” to bring Japan out of deflation.
Kuroda, now 71, has repeatedly chosen to implement monetary-easing policy measures that were not expected by financial market players and played a leading role in the implementation of Abenomics, Prime Minister Shinzo Abe’s economic policy package. As a result, the Japanese economy has been recovering.
However, Kuroda’s pledged numerical target of a 2 percent inflation rate is far from being achieved. The government has few options for effective economic measures, and Kuroda has faced strong headwinds caused by global economic conditions.
With two years remaining in his term as the central bank governor, Kuroda’s skills in managing the nation’s economy are likely to face further crucial tests.
On March 15, the Bank of Japan downgraded its assessment of the nation’s economy for the first time in about two years. However, Kuroda remarked at a press conference, “As a basic trend, the Japanese economy will gradually expand.”
He remained confident that the Japanese economy is continuing on a recovery track.
Kuroda was formerly a Finance Ministry bureaucrat and served as the governor of the Asian Development Bank. On March 20, 2013, he took the post of Bank of Japan governor.
Kuroda’s predecessor at the central bank, Masaaki Shirakawa, was criticized for taking only small-scale action in controlling monetary policy. Kuroda drastically changed this course by repeatedly making aggressive remarks.
He has said, “I will do everything that I can do” to raise commodity prices, for example.
In April 2013, Kuroda hammered out a policy of quantitative and qualitative monetary easing, a huge monetary easing plan that doubled the amount of money in circulation in the nation. As the policy took root, it was dubbed “monetary easing in a different dimension.”
At that time, the Japanese economy was struggling under such conditions as the yen’s appreciation and sluggish consumer spending.
Kuroda aimed through his confident stance to raise expectations about an exit from deflation, and the nation’s economy began moving in a virtuous cycle, even if only slowly.
In the past three years, Japan’s markets have shown large movements. The Nikkei Stock Average of 225 selected issues was at the 12,000-point level when Kuroda took his post. It recently reached a level 4,000 points higher.
Also, the exchange rate was ¥90 to the dollar at the start of Kuroda’s term. The value has recently depreciated by nearly ¥20.
Kuroda’s style often goes against market players’ predictions, surprising them over the timing and content of his policy shifts. Kuroda’s thinking is that such an approach will make his monetary easing policy more effective.
On Jan. 29 this year, the Bank of Japan decided to introduce a negative interest rate for the first time in the nation’s history. Only about 10 days before that, however, Kuroda had stated in a question-and-answer session at the Diet, “I’m not considering lowering interest rates.”
Kuroda made dramatic changes in monetary policies three times. In all three cases, Kuroda went against market expectations in the timing and scale of increased monetary easing.
Though some economists have said monetary easing policies have limited effect, Kuroda remains confident. “I will proceed with monetary easing by using [various] means,” he said.
However, Kuroda’s style of placing importance on surprising the markets also risks causing disarray.
When the central bank decided to introduce the negative interest rate, insufficient explanations were made, causing market players to say the central bank’s dialogue with the market was lacking. Fears spread that savings in individuals’ bank accounts would decrease.
On the other hand, Kuroda did not expect sharp falls in crude oil prices, which have lowered the rate of inflation on commodity prices in Japan.
Just after taking over as central bank governor, Kuroda set a goal of achieving a 2 percent inflation rate within about two years. But in January, the latest month for which data are available, the inflation rate, excluding perishable food, was zero.
Kuroda’s schedule to achieve the inflation target has been postponed to “around the first half of fiscal 2017.”(Tomoko Hatakeyama and Hiroyuki Tanaka / Yomiuri Shimbun)
Link: http://the-japan-news.com/news/article/0002822935
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