It's official: Kuroda nominated to BoJ's top spot

  @CRrileyCNN February 27, 2013: 10:00 PM ET
kuroda

Haruhiko Kuroda has been nominated to lead the Bank of Japan.

HONG KONG (CNNMoney)

Japanese Prime Minister Shinzo Abe picked Haruhiko Kuroda Thursday to lead the Bank of Japan, a nomination that will buttress Abe's efforts to loosen monetary policy at the central bank.

Kuroda, the current president of the Asian Development Bank, has years of experience in international finance and monetary prescriptions that largely mirror those of Abe.

The former finance ministry official has been critical of the central bank in the past, saying it has been too timid in its efforts to spur growth and fight deflation.

The opposition Democratic Party of Japan signaled earlier this week it would not oppose Kuroda in the Diet, clearing the way for lawmakers to approve the nomination.

With Japan in recession, Abe based his election campaign last year on a commitment to take radical steps to end years of deflation, combining promises of looser monetary policy with pledges of fiscal stimulus. Kuroda, if confirmed, gives Abe a like-minded ally at the top of the central bank.

The Japanese yen has already weakened significantly in response to policy changes, falling 20% against the U.S. dollar since the beginning of October and driving up the stock market. It has also lost ground against the euro and some Asian peers, raising concerns that Japan may be engaged in a race to the bottom to promote exports.

Weak currency cheapens the price of a country's exports, making them more attractive to international buyers by undercutting competitors. Japan's exporters have cheered the yen's decline, and Abe's popularity has skyrocketed in recent weeks.

Related: Japan's economy contracts for third straight quarter

Kuroda appears willing to follow through on Abe's policies, telling the Wall Street Journal earlier this month that Japan has "plenty of room for monetary easing."

"If necessary and if appropriate, of course additional monetary easing this year could be justified," he said.

Masaaki Shirakawa, the current BoJ head, has announced he will stand down on March 19, several weeks before his term was due to end.

Shirakawa agreed last month to double the bank's inflation target and adopt open-ended purchases of government bonds. But he is opposed to some of the more extreme proposals considered by the bank and has been accused of doing too little, too late.

Related: Don't fight the BoJ

By way of contrast, Kuroda told the Journal that the BoJ must move aggressively to meet its 2% inflation target.

"You cannot wait for five years, 10 years or 15 years. You have to achieve the target within a reasonably short time period," he said.

The political pressure on the Bank of Japan has caused consternation in the international community, with some lobbing charges of currency manipulation in Japan's direction.

Tokyo has rejected those claims, saying its policies are aimed at the economy not the yen, but the G7 group of leading industrial nations - including Japan - felt compelled to issue a rare statement earlier this month aimed at cooling talk of a currency war.

Kuroda, for one, seems undeterred, telling the Journal that the yen's weakening is good for the global economy.

"From a global point of view, is it good for the Japanese economy to continue to suffer from deflation...and low growth?" he asked. "That is not good for Japan, not good for the world economy."

-- CNN's Junko Ogura and Yoko Wakatsuki contributed to this report. To top of page



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