MNI INTERVIEW: BOJ To Hold Course As Japanese PM Suga Goes

The Bank of Japan will keep its monetary policy framework unchanged whoever replaces Prime Minister Yoshihide Suga as president of the ruling Liberal Democratic Party, a former BOJ executive director told MNI on Friday.

"When the coalition party holds the [legislative] majority, there is no room for the BOJ to change its policy framework," said Kazuo Momma, now executive economist at Mizuho Research and Technologies.

Japan's next prime minister is likely to continue with "Abenomics"-style policies, combining major fiscal and monetary easing, and only a departure from this path would prompt changes by the BOJ, Momma said.

DELTA HIT TO ECONOMY

If as expected the Liberal Democrats retain a lower house majority in elections which could be held on Oct. 17, BOJ Governor Haruhiko Kuroda will probably be replaced by a like-minded central banker when his term concludes in April 2023, he added. The Liberal Democrats leadership election is set for Sept. 29, with contestants possibly including former foreign minister Fumio Kishida, vaccines minister Tara Kono and former defence minister Shigeru Ishiba.

Suga's decision to resign comes after his struggle to contain the Covid-19 pandemic dented his popularity. Covid's Delta variant is now impacting activity around the world, and Japan's economy probably stalled in the third quarter said Momma, also former BOJ chief economist.

"If the coronavirus wanes, the economy will recover in the fourth quarter," he said.