Japan’s next central bank governor needs the ability to be “crafty” in how they communicate and should largely stick with loose monetary policy, according to Akira Amari, a former economy minister who was involved in laying out the country’s 10-year-old inflation target.
(Bloomberg) — Japan’s next central bank governor needs the ability to be “crafty” in how they communicate and should largely stick with loose monetary policy, according to Akira Amari, a former economy minister who was involved in laying out the country’s 10-year-old inflation target.
“I’d like to see someone who can use a bit of cunning in a good way,” Amari said in an interview with Bloomberg on Friday. “If something has to be done that the markets may take negatively, they should be able to release information little by little so that by the time of the announcement it’s already factored in. Someone who can be crafty would be good.”
His comments come after current Bank of Japan Governor Haruhiko Kuroda faced criticism over his communication last month when he shocked financial markets with unexpected tweaks to policy that sent the yen soaring. The BOJ left policy unchanged at this month’s meeting, this time prompting a slide in the yen and bond yields.
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Kuroda’s term ends in April and speculation is simmering over who Prime Minister Fumio Kishida will nominate as his successor, a move expected in the coming weeks. Inflation at 4%, its highest since 1981, is feeding speculation over how and when Kuroda’s ultra-easy policy should be wound down as traders bet against the central bank’s stimulus framework.
The BOJ is facing the difficult task of explaining why it is continuing with stimulus when inflation is already twice the level of its target and after all other major central banks have tightened policy to rein in stronger-than-expected price growth.
The central bank’s decision to widen the band around its 10-year yield target was interpreted by three-quarters of polled economists as a move paving the way for policy normalization. The bank said it was aimed at improving the sustainability of stimulus by improving the functioning of the bond market.
Amari said there should be no departure from stimulus. He also said it was too early for any substantive change to a 2013 accord between the BOJ and the government that sets out the 2% inflation target.
Tweaks to Japan’s Inflation Accord Would Flag BOJ Policy Change
“Changing the content would be dangerous,” Amari said, referring to the accord. “We are absolutely not pivoting into an exit phase like the U.S. and Europe.”
While he said he hadn’t been consulted about the selection of the new governor, Amari said Kuroda’s successor should largely retain loose policy based around the yield curve control currently in place.
“They may need the ability to seem fresh,” he added. “But that shouldn’t convey the message that they’re changing direction.”
–With assistance from Isabel Reynolds.
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