Haruhiko Kuroda has a “good chance” to be re-appointed for a second term as Bank of Japan’s governor, according to a senior official of Prime Minister Shinzo Abe’s ruling party.
“There shouldn’t be big changes in monetary policy, especially when financial markets have been very sensitive about any hint of an exit strategy,” Masahiko Shibayama, a senior Liberal Democratic Party official who is close to Abe, said in a Wednesday interview.
With the Federal Reserve normalizing policy and the European Central Bank hinting at ending asset purchases, focus has sharpened on the future direction of Japan’s central bank. Bond and currency traders are looking for any sign of when, and how, the bank might alter current policy.
However, unlike when Abe appointed Kuroda in 2013, the government isn’t looking for a radical policy change under a new governor, according to Shibayama, as monetary stimulus is supporting the current economic recovery.
A policy change now would “be very risky” for financial markets and foreign-exchange rates, Shibayama said. With inflation far from BOJ’s 2 percent target, the time to wind down the bank’s stimulus measures hasn’t come yet, he said.
Markets expect Kuroda to be reappointed. By not reappointing Kuroda, Abe would create uncertainties for the outlook of Japan’s monetary policy, economist Allen Sinai said last week.
If reappointed, Kuroda would be the first BOJ governor since the 1950s to have a second term. Abe is expected to nominate a governor and two deputies before their five-year terms end in April and March, respectively. His coalition government has a majority in both houses of the Diet, which approves the nominations.
Shibayama is close to Abe, having supported his bid for the party leadership in 2012. He served as an aide in the prime minister’s office until August last year, when he became the chief deputy secretary-general of the party.
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