Wed, Apr 19, 2017 - Page 10 News List

Japan elects reflationist, banker, to BOJ

BREAKING TRADITION:The bank is next year expected to reappoint Governor Kuroda because of his relationship with Abe and central role in economic policy planning

Bloomberg

The Japanese parliament nominated banker Hitoshi Suzuki and economist Goshi Kataoka to the Bank of Japan (BOJ) board to replace two members who have frequently dissented against the policy direction set by Bank of Japan Governor Haruhiko Kuroda.

Suzuki, 63, an audit-board member of Bank of Tokyo-Mitsubishi UFJ Ltd, and Kataoka, 44, of Mitsubishi UFJ Research and Consulting Co, are to replace Takahide Kiuchi and Takehiro Sato, whose terms end on July 23.

Kataoka is viewed as a reflationist who ought to bolster support for Kuroda’s aggressive stimulus, while Suzuki brings experience in commercial banking and financial markets in Japan and abroad.

Although the board has comfortably passed Kuroda’s policies 7-2 in meetings for more than a year, it was split 5-4 on the decision to introduce negative interest rates in January last year.

“The nominations show [Japanese] Prime Minister Shinzo Abe wants the BOJ to continue the current reflationary stimulus program,” Nomura Securities Co economist Yasuhiro Takahashi said.

“Abe is also aware that he shouldn’t push the gas pedal too much as the BOJ’s negative-rate policy last year caused public concern,” Takahashi said.

FREEZE ON PLANS

Kataoka’s views are close to BOJ Deputy Governor Kikuo Iwata and fellow board member Yutaka Harada, said Mari Iwashita, chief market economist at SMBC Friend Securities Co, adding that he might have a focus on the quantity of purchases by the central bank.

“There’s no doubt that he’s a reflationist,” she said.

In a research paper last year titled A Reboot of Reflationary Policy Is Wanted, Kataoka advocated for greater fiscal spending and a freeze on plans to increase Japan’s sales tax in 2019.

Suzuki’s banking experience could make him more sympathetic to the industry’s struggle with negative rates.

“It’s good that a person who’s from the banking industry has been chosen given the negative-rate policy,” Iwashita said.

“It’s good that someone with expertise for a move toward an exit from the negative rate policy has been selected,” Iwashita added.

The BOJ board is set for further change early next year, with the terms of the two deputy governors due to expire in March and Kuroda’s tenure ending in April.

Some analysts see a chance that the government will break from tradition and reappoint Kuroda, given his good relationship with Abe and the pivotal role the central bank has played in the Japanese prime minister’s economic program.

With Japan far from its 2 percent inflation target and the economic outlook fragile, the likelihood is the BOJ will need to continue significant stimulus for the foreseeable future.

TAPERING AGENDA

Yet, tapering is on the agenda for other major central banks and investors have challenged Kuroda’s view that there is still ample room for ongoing purchases of government bonds and other securities.

Kataoka would stand up against any premature talk of exit from stimulus or a rate hike, said Yuji Shimanaka, an economist at Mitsubishi UFJ Morgan Stanley who has known him for two decades.

Meanwhile, Suzuki is a financial markets professional with a firm grasp of how the BOJ’s yield-curve control program affects investors and commercial banks, Shimanaka said.

Suzuki has held various other positions in the bank and was on the audit board from last year.

Kataoka finished the requirements for a doctorate from Keio University and specializes in macro-economy, economic theory and the practical application of economics, according to his biography page on the Mitsubishi UFJ Research and Consulting Web site.

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