With the governor's term ending on April 8, the Kishida government has a rare window to ruffle the status quo on policy.
Fresh off a robust victory in upper house elections, the government of Fumio Kishida has started a process that could replace five slots on the nine-member Bank of Japan Board by April of next year, including Governor Haruhiko Kuroda and two deputies, Masayoshi Amamiya and Masazumi Wakatabe.
A focus for BOJ officials is whether veterans will fill the top roles, likely either Amamiya who handles monetary operations now, or a former deputy governor Hiroshi Nakaso, a seasoned hand in global central banking circles. Both have solid contacts with lawmakers and their terms end on March 19.
But there is a chance that new appointees Hajime Takata and Naoki Tamura who join on Monday could eventually be led by the first outsider at the BOJ in a decade and Amamiya’s and Wakatabe get replaced.
For now though Takata, an economist at brokerage Okasan Securities who has voiced concern over side-effects of powerful easy policy, is expected to keep with current policy.
Tamura, a senior adviser at Sumitomo Mitsui Banking Corp who has reportedly voiced concern on bond market operations distorting markets under the BOJ’s policy, is also likely to support Kuroda's strong stance on maintaining easy policy to the end of his term even as inflation jumps and the yen weakens, (See: MNI STATE OF PLAY: BOJ's Easy Views Intact Despite Higher CPI.)
TWEAKS NEXT YEAR?
Any new governor is expected to tweak or adjust the policy framework to increase the flexibility of monetary policy, although the 2% price target is likely to be maintained,
But at least one dovish voice on will be missing as Takata replaces Goushi Kataoka, a vocal advocate of powerful easy policy, though Tamura's views are said to align with outgoing board member Hitoshi Suzuki on damage to market functioning from easy policy.
The remaining four board members and the end of their terms are: Seiji Adachi, March 25, 2025, Noguchi Asahi, March 31, 2026, Toyokai Nakamura, June 30, 2025, and Junko Nakagawa, June 29, 2026.
Some clarity on the views of the new members will come on Monday as they are set to hold a news conference after they are officially appointed by the government.
The BOJ faces pressures on its near-term economic outlook as price gains are expected to continue into the second-half of the year, and a jump in Covid-19 cases dims the growth outlook. The BOJ also lags major central banks globally on a path to higher interest rates to combat inflation and withdrawing support measures introduced during the pandemic, (See: MNI INSIGHT:Covid Complicates BOJ Calculus On Business Support).
Some talk of earlier BOJ tweaks to policy have now been downplayed because of the economic outlook, even as the government has its own plans ahead on stimulus to recover from pandemic curbs and issues like supply-chain gaps that have hit recover, (See: MNI INSIGHT: Exit From Negative Rates An Option For BOJ).