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With just four reflation-minded members on the Bank of Japan's nine-strong board, Governor Haruhiko Kuroda will be able to resist any pressure for additional policy easing and stick to his view, which is to act only in the event of a considerable economic shock, MNI understands.
For example, a rapid and sustained rise in the yen, such as to levels below JPY100, could prompt Kuroda to consider deepening the short-term policy interest rate from -0.1%. In a recent interview with MNI, former BOJ Chief Economist Hideo Hayakawa said moves in March to put a framework in place to cut rates further into negative territory were made largely to placate the reflationist wing of the party and there was little chance of a further cut anytime soon.
Kuroda, whose second five-year term ends on April 8, 2023, has become increasingly cautious about additional measures as he believes they heighten the negative side effects of prolonged easing. He has repeatedly said that the BOJ will relax policy further "without hesitation," but only if necessary.
The governor recently said that the BOJ has ensured a more effective and sustainable policy framework through the March review, indicating the BOJ will continue to maintain status quo even though it will take longer for the bank to reach its 2% price target.
That is in contrast to the view of the four reflationists, who advocate powerful monetary easing and fiscal spending to boost inflation.
Kuroda's thinking on monetary policy is shared and influenced by Deputy Governor Masayoshi Amamiya, his right-hand man and likely successor. The other deputy governor, Masazumi Wakatabe, is among the four reflationists although he did not raise any objections at the latest meeting.
The remaining three are economist Asahi Noguchi, who came on board April 1, and board members Goushi Kataoka and Seiji Adachi. Kataoka has previously voted against policy decisions but he didn't propose any change at the most recent meeting as he did not think he would secure enough support for his opinion.
In general, the BOJ governor has considerable say in policy decisions and board members from the private sector have little influence.
Both Hayakawa and Makoto Sakurai, a former BOJ board member whose term ended in March, have told MNI that the central bank will be limited to policy fine-tuning until Kuroda's term ends and that there will be no shift in the wider framework unless the economic recovery is much stronger than expected.