Bank of Japan Gov. Haruhiko Kuroda should stay on for a second term to handle the potential fallout from five years of unprecedented monetary easing, according to the leader of an opposition party and former official at the central bank.
“I think he should stay on, but not in a positive way,” Kohei Otsuka, 58, said in an interview Wednesday at his Democratic Party’s offices in Tokyo. “He hasn’t reached his targets and he risks a legacy of even more serious problems, so he should take responsibility for clearing things up.”
Prime Minister Shinzo Abe said over the weekend that his decision on the BOJ governor remains a blank slate, but the 73-year-old Kuroda is widely expected to be reappointed after his term expires in April. His drastic policies have aided economic growth and weakened the yen, helping to push stock prices to levels not seen since the 1990s. Even so, the bank remains far from its 2 percent inflation goal.
Winding back the massive easing will be difficult. A relatively minor change to BOJ bond purchases on Tuesday prompted a rise in the yen — a reaction that Otsuka said illustrates “nervousness and instability” in the markets. The politician, who dealt directly with the aftermath of Japan’s 1980s bubble as a central bank official, said a change of personnel would be an additional risk at a difficult moment.
“If they are too proactive in seeking an exit, the possibility of causing a crash becomes higher,” Otsuka said. “Or they could freeze in the face of this situation and do nothing.”
Otsuka’s party was the main opposition group going into the campaign for October’s general election. But his party fractured and now has only 47 members, all of whom are in the less powerful Upper House.
He said the current market mood bore a resemblance to 1988 — near the height of the bubble. But this time is different, he added, saying most Japanese haven’t felt the benefits of the economic recovery, and any fall in markets might have an even worse impact than the 1990s hangover from the last bubble.
“Last time, it wasn’t just the markets rising, but ordinary workers and households saw their incomes rise substantially,” Otsuka said.
“In the past five years, ordinary people have gotten poorer,” he said. “If there is a recession, companies will cut pay and so those people who have gotten poorer over the past five years will struggle even more in their everyday lives.”