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MNI (Tokyo)
TOKYO (MNI)

Haruhiko Kuroda will see out his term as Bank of Japan Governor, working alongside any incoming Prime Minister to fight the impact of Covid-19 on the economy, despite speculation in financial markets that he may step down in the wake of incumbent PM Shinzo Abe's surprise resignation announcement on August 28, MNI understands.

Kuroda, 75, was appointed central bank governor in 2013 by Abe and has worked in tandem with the PM to not only to fight years of deflation but also to achieve solid economic growth.

Abe's decision to step down also triggered concerns that with or without Kuroda at the helm, the BOJ could retreat from its accommodative policy, which saw the yen initially strengthen and the Nikkei 225 fall, before recovering their poise.

Unless he succumbs to ill health, certainly not known as an imminent concern, Kuroda won't step down half-way through his latest term, due to end in April 2023, knowing such a move will likely destabilize financial markets to a greater extent than Abe's departure, even though the overall impact should be temporary.

BANK INDEPENDENCE

If Kuroda went now, there would be a concern it would undermine both the BOJ's independence from the political fray and the central bank's assertion that its huge government bond purchases are a leg of its monetary policy and not monetization or government financing.

While Japan continues with its flight against the coronavirus pandemic, macro-policy and the BOJ's accommodative stance, will not change whoever becomes the next prime minister. The fight against non-existent inflation/deflation, how to unwind temporary measures put in place to ease financing for companies through the virus and how to stimulate economic growth remain.

And the overriding driver for the policy considerations of any new PM, Kuroda and BOJ is how Covid-19 develops in coming months and years and whether a credible vaccine or therapeutic drug can be found.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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