Japanese Prime Minister Shinzo Abe nominated an advocate of aggressive policy action to head the Bank of Japan (BOJ), challenging the opposition to back his push for radical action as officials warned a nascent economic upturn could easily be derailed.
By choosing Asian Development Bank president Haruhiko Kuroda to take over at the central bank, Abe is looking to deliver on an election pledge of overhauling monetary policy to revive the economy after nearly two decades of mild deflation and lackluster growth.
“The new BOJ needs to accelerate its pace of asset accumulation and extend the maturities of government debt that it is buying,” said Masayuki Kichikawa, chief Japan economist at Bank of America Merrill Lynch.
Photo: Reuters
“By strengthening monetary easing, the BOJ may be able to stabilize the yen exchange rate. Then we will begin to see some positive impact on consumer prices from next year,” Kichikawa said.
Academic Kikuo Iwata, who supports unconventional monetary policy, and Bank of Japan official Hiroshi Nakaso, who has hands-on knowledge of the bank’s inner workings, were nominated as BOJ deputy governors yesterday.
Abe has already successfully pushed for changes at the central bank, which in January doubled its inflation target to 2 percent and agreed to an open-ended asset buying program from next year, and the new leadership team is expected to push for even more aggressive action.
The nominations were no surprise to investors, having been well flagged recently, and so there was little market reaction.
The three men need to be approved by both houses of parliament, which will vet them in coming days. Abe does not have a majority in the upper house, and so needs opposition support for his central bank picks to take office next month.
Soon after the nominations were announced, the challenge facing the three was laid out as Japan’s finance minister and a BOJ board member both said that despite positive signs, a recovery in the world’s third-largest economy was by no means certain.
Japan’s economy has contracted for the past three quarters, but there have been some signs of life in recent data, including consecutive rises in factory output and signs of a pick-up in the export engine.
A major factor behind hopes of the recovery has been the sharp fall in the yen against the US dollar to near three-year lows last month, which was driven by Abe’s promises of radical fiscal and monetary stimulus.
Japanaese Minister of Finance Taro Aso said he was keeping a close eye on the yen, and a Bank of Japan board member said there was uncertainty that the economy would make a full-fledged recovery.
“We will continue to monitor currency moves and make sure the economy recovers by encouraging private investment, jobs growth and an expansion in wages,” Aso told parliament.
Central bank board member Takahide Kiuchi told business leaders that future stimulus would most likely be through expanding the bank’s current asset-buying and lending program, although other measures being proposed in markets, such as buying riskier assets, could be examined.
“We will strive to achieve our new target, including through taking additional easing steps boldly when necessary,” said Kiuchi, who was one of two board members to vote against adopting the 2 percent inflation target in January.
Kuroda, 68, would replace Bank of Japan Governor Masaaki Shirakawa, 63, who is due to leave office on March 19.
A former finance ministry bureaucrat who oversaw yen-selling intervention from 1999 to 2003, Kuroda has said the central bank should not buy foreign currency bonds as that constituted currency policy.
Yesterday, Aso was also cautious on such a policy, saying it could be seen as currency intervention and in breach of agreements with other governments.
Kuroda does support increased purchases of government bonds and other domestic assets, such as corporate bonds or exchange traded funds, to pump cash into the economy. He has suggested two years as an appropriate amount of time for the central bank to meet its 2 percent inflation target.
In contrast, Iwata prefers buying more longer-dated government bonds over purchases of corporate bonds or exchange traded funds.
Nakaso may not feature prominently in policy setting.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure