Haruhiko Kuroda spoke to reporters one last time as the Governor of the Bank of Japan on Friday, ending a decade-long term filled with surprises that shook global financial markets and transformed the image of the central bank previously known for doing too little, too late.
(Bloomberg) — Haruhiko Kuroda spoke to reporters one last time as the Governor of the Bank of Japan on Friday, ending a decade-long term filled with surprises that shook global financial markets and transformed the image of the central bank previously known for doing too little, too late.
He ended his 10 years expressing regret that his goal ultimately wasn’t achieved, but said the possibility of reaching stable price growth is higher.
“The time for achieving the 2% stable price goal is now getting close,” Kuroda said. “The norms surrounding prices are changing.”
In the hour-long press conference, Kuroda looked back on his time at the helm of the central bank, reflecting on everything from memories of former Prime Minister Shinzo Abe, to hopes for his successor and long-time friend, Kazuo Ueda. While admitting his goal of getting to 2% stable inflation was never met, his message appeared to be at least the central bank is now closer to getting there.
“Kuroda stuck with what he has said before — there were no surprises from his remarks,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. “He was trying to give no policy indication that could tie Ueda’s hands. His successor can start his term without any constraint.”
After being picked by Abe, Kuroda opened a new chapter for central banking with aggressive easing. He spent $11.7 trillion to keep his stimulus rolling, making the BOJ’s balance sheet multiple times bigger than those of the Federal Reserve and European Central Bank, relative to the size of the economy.
The governor has said the massive stimulus has succeeded in pulling the nation out of 15 years of deflation. Yet he leaves unfinished the mission of exiting from the unorthodox, ultra-loose monetary policy, and the task will now fall to Ueda.
The incoming governor has indicated he will continue with the BOJ’s current easing policy until steady inflation is achieved, although market players will be closely watching whether and how he addresses the growing side effects of its yield curve control program.
Kuroda, for his part, said that he sees inflation slowing back below 2% in the middle of this fiscal year, but achieving the goal is still possible. “Consumer prices aren’t going back to constantly falling below 2%,” he said.
The influence of the BOJ increased in global financial markets under Kuroda, and it is now seen as the last anchor of low rates after other global central banks have rushed to tame inflation with higher rates. Kuroda’s rock bottom interest rates helped the yen hit a 32—year low, raising the cost of living for households and prompting some criticism.
Prior to Kuroda, the BOJ’s efforts against deflation were widely considered feeble and behind the curve.
Kuroda’s shock-and-awe methods changed that. The last surprise came in December, as the BOJ’s move to widen a range for Japanese 10-year bond yields shocked global financial markets from US treasuries to gold. Kuroda described the move as being aimed at improving the functioning of financial markets, although he had previously characterized such a tweak as a rate hike and possibly harmful for the economy.
Still, Kuroda denied at the press briefing Friday that any of the policies he oversaw intended to surprise.
The outgoing governor’s easing measures even prompted concerns it was doing too much and creating market distortions. The ultra-easy policy is blamed for drying up activity in Japan’s bond market. The bank now owns more than half of Japan’s public debt market, and through the purchase of exchange-traded funds, it is also essentially the biggest owner of shares in companies ranging from Advantest Corp. to TDK Corp.
Most economists expect some form of policy change coming this year. Backing away from the stimulus framework without disrupting markets, however, will be a difficult balancing act.
Following the December move, some 71% of BOJ watchers said the bank had problems in communications — an issue Ueda will likely be under pressure to address. The new governor is expected to hold an inaugural press conference Monday, with investors listening for any hint of a policy shift.
For Kuroda, that level of scrutiny is now in the past. Asked about his plans after he steps down, he said that he’s considering a teaching position.
“I’d like to consider something like teaching at a university somewhere,” he said. “I’m 78, so I have no intention of taking on any kind of full-time work.”
(Updates with details from the press conference, economist comments)
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