With Abeʼs blessing, Kuroda seen heading for another term as BOJ chief

October 18, 2017

While Haruhiko Kuroda's fate as Bank of Japan governor is seen by many as largely depending on whether Prime Minister Shinzo Abe stays in power, recent media surveys suggest that Abe's ruling Liberal Democratic Party will win big in the House of Representatives election on Sunday.

Abe's nearly-five-year-old reflationary policy agenda, dubbed Abenomics, featuring aggressive fiscal spending, structural reforms and massive monetary stimulus, is set to face the verdict of voters in the general election for the all-important lower chamber of Japan's parliament.

Japan's economy has gathered momentum since the Abe administration's inauguration in December 2012. Economic and Fiscal Policy Minister Toshimitsu Motegi recently said it is likely that the economic recovery has since continued for 58 months through last month, the second-longest run of expansion since the end of World War II.

The BOJ introduced its "quantitative and qualitative" monetary easing in April 2013, soon after Kuroda took office as its governor, and continued to take novel steps, including a negative interest rate policy, to support Abenomics.

"I completely trust Governor Kuroda's monetary policy," Abe told a House of Councillors Budget Committee meeting in January, in response to a question about who is likely to be the next BOJ governor. "I want him to move ahead in this direction."

Given the prime minister's support for Kuroda, financial market participants believe he is likely to be reappointed BOJ governor.

"It is necessary to continue the current easing policy patiently," Takehiro Noguchi, senior economist at the Mizuho Research Institute, said, adding that Kuroda's reappointment would give the strong impression at home and abroad that the central bank is committed to going ahead with the easing policy.

The Abenomics-driven recovery, however, has been fiercely criticized by opposition parties for failing to bring about pay increases. Despite the massive easing policy, the BOJ appears to have little chance of achieving its inflation target of 2 pct before Kuroda's current term expires on April 8, 2018. Jiji Press