If Shinzo Abe wins Sunday’s Lower House election, it will boost the chances that Bank of Japan Gov. Haruhiko Kuroda will serve a second term, according to a former economy minister.
“Kuroda has done an excellent job. He should continue,” Heizo Takenaka said in an interview Monday. After Kuroda pushed through massive stimulus, prices have stopped falling and the economy is in better shape, Takenaka said.
Abe has expressed his trust and confidence in Kuroda numerous times, and reappointing him was seen as the most likely scenario in a recent survey of economists. Even though inflation is nowhere near the BOJ’s 2 percent target, the Nikkei 225 stock average closed at a 21-year high Monday and the economy is on track for the longest expansion since 2001.
Recent polls show Abe’s ruling Liberal Democratic Party could win a majority in the Lower House by itself in the Oct. 22 election. An Abe victory “will of course push the tide” toward a second term for Kuroda, said Takenaka, now a professor at Toyo University in Tokyo. “I think there is a sufficient amount of trust between the government and the BOJ for that to happen.”
Takenaka and Abe served together in the Cabinet of Prime Minister Junichiro Koizumi in the early 2000s. He also served with current Tokyo Gov. Yuriko Koike, who was environment minister at the time and is now an opposition leader. He is a member of an advisory panel for special economic zones chaired by Abe.
Unlike the 2012 election that returned Abe to power, the BOJ isn’t the center of debate this time, with none of the parties proposing alternative policies for the central bank. Still, if Kuroda were reappointed, the decision could draw criticism. Abe advisers Nobuyuki Nakahara and Etsuro Honda have both suggested Kuroda should step down because the central bank needs a new face.
Takenaka said that even though there is no need for further easing at this point, an exit won’t happen soon, so the BOJ needs to continue stimulus with “considerable patience.”
Kuroda, speaking in Washington over the weekend, pledged to continue monetary easing as inflation remains a long way from his target. Japan’s core inflation rose 0.7 percent in August.
Takenaka became widely known after he led the write-off of bad loans at Japan’s debt-ridden banks, when he served as financial services minister under Koizumi. He also held the economic and fiscal policy portfolio and oversaw plans to privatize Japan Post.
Appointing Kuroda for another term will raise expectations for appropriate policies, Takenaka said. “A shift in personnel can change expectations at once.”
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