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ADB president Kuroda downplays speculation over central bank role

Kyodo

Asian Development Bank President Haruhiko Kuroda voiced support Monday for Prime Minister Shinzo Abe’s financial policies including the introduction of a 2 percent inflation target but kept mum about speculation he may become the next Bank of Japan governor.

In an interview with media organizations including Kyodo News, Kuroda said the BOJ’s introduction of the target, proposed by Abe, was “epoch-making” and that the goal should be achieved “in about two years.”

Kuroda, a former Japanese vice finance minister for international affairs, also said the central bank could carry out further monetary easing to help the country’s flagging economy, saying, “There are still a lot of assets within Japan that should be purchased.”

Noting that central banks are responsible for stabilizing prices in any country, Kuroda said, “It’s true that the BOJ has not fulfilled its duty thoroughly” as Japan’s deflation has persisted for some 15 years.

On being mentioned as a potential candidate for the next BOJ governor, Kuroda said he is “fully satisfied” in his current position, which he is contracted to hold for roughly four more years, and he would refrain from making comments regarding a “hypothesis.”

Since the current BOJ Governor Masaaki Shirakawa announced earlier this month that he would step down before the end of his term in early April, several names have emerged among analysts and financial market participants as his potential successor.

Among them are former Vice Finance Minister Toshiro Muto, currently chairman of the Daiwa Institute of Research, and former BOJ Deputy Governor Kazumasa Iwata, who heads the Japan Center for Economic Research.

Regarding the yen’s recent depreciation against other major currencies, Kuroda said Abe’s economic policies, dubbed “Abenomics,” may have had an impact on the trend, but it is “fundamentally a process of correction from an excessive appreciation of the yen.”

He also defended Abe’s policies that have been criticized by some as aimed at manipulating exchange rates to weaken the Japanese currency, saying, “Japan needs monetary easing as it is in deflation. Japan remaining in deflation with a continued low growth rate would not have a positive impact on the global economy.”

On Japan’s growth strategy, Kuroda said Japan “lacks competitiveness in the farming and services sectors” and Japan’s involvement in the U.S.-led Trans-Pacific Partnership free trade agreement could be a “detonator” for a change.