Prime Minister Shinzo Abe on Sunday called on Bank of Japan Gov. Haruhiko Kuroda to continue with the central bank’s one-sided effort to reflate the economy, but added that he was undecided on whether to reappoint Kuroda to another five-year term.
Kuroda was handpicked by Abe to take the helm of the BOJ in 2013 to deploy a massive stimulus program — part of the prime minister’s three-pronged Abenomics plan that was aimed at boosting growth with structural reforms. But the BOJ has failed to hit its inflation target of 2 percent, and any economic reforms remain scarce.
Abe said the government would continue to work with the BOJ to boost growth so he can officially declare an end to deflation at the earliest date possible.
“Gov. Kuroda has met my expectations with job availability at a 43-year high,” Abe said in an interview with NHK.
“I want him to keep up his efforts. But I haven’t made up my mind,” on who should succeed Kuroda when his term ends in April, he added.
Many analysts say Kuroda has a good chance of being reappointed when the government evaluates him and his two deputies in the coming months — decisions that need Diet approval.
Abe said Japan’s economy was showing signs of emerging from deflation, with a tightening job market pushing up wages amid a shrinking population and workforce.
“We’ll deploy all available policies so that we can declare an end to deflation at the earliest date possible,” Abe said.
“It might not necessarily be this year, but the government and the BOJ must fulfill their responsibilities” so as to ensure conditions to bring about an end to deflation, he added.
The government looks at several factors, such as inflation data and the output gap, to determine whether the economy has sustainably exited deflation.
Some policymakers are keen to declare victory, which would help Abe argue that his policies succeeded in reflating the economy. But doing so could also give the BOJ justification to withdraw crisis-mode stimulus, some analysts say.
Japan’s economy expanded for the seventh straight quarter in the July-September quarter, boosted by robust exports and capital expenditures.
Core consumer inflation rose 0.9 percent in November from a year earlier, marking the 11th straight month of gains but still distant from the BOJ’s 2 percent target.
Abe has urged companies to raise wages by 3 percent or more this year on the view that wage hikes are critical to boost consumption and sustain the strengthening economic recovery.
For the next few months, the markets will be closely watching whether Kuroda will stay or be replaced.
Other names have been floated by the media, including BOJ Deputy Gov. Hiroshi Nakaso, Executive Director Masayoshi Amamiya, Ambassador to Switzerland Etsuro Honda, Columbia University professor Takatoshi Ito and Hiroshi Watanabe, a former vice finance minister for international affairs.
In the interview, Abe also addressed a dispute with Seoul over a landmark deal aimed at resolving the issue of South Korean “comfort women” who were forced to work in Japan’s wartime military brothels, with the prime minister again urging the South to maintain and implement the December 2015 agreement.
Last month, South Korean President Moon Jae-in said the 2-year-old deal, struck under the government of his impeached predecessor, Park Geun-hye, does not resolve the issue because negotiations that led to the agreement were flawed.
Abe also brushed off questions about his Liberal Democratic Party’s presidential election, scheduled for September, saying he would not consider the issue until after the Diet closes on June 20.
His re-election in the party leadership race could see him head the LDP until 2021 and make him the longest-serving prime minister in Japanese history.