Japan's government has nominated Asian Development Bank President Haruhiko Kuroda to head the country's central bank, counting on his support for more aggressive monetary policy to help the world's third-biggest economy escape recession and deflation.
The current Bank of Japan governor, Masaaki Shirakawa, will step down on March 19, three weeks before his term was due to end. Prime Minister Shinzo Abe favored Kuroda, whose formal nomination was made to the parliament today. A vote on the choice is due next month.
The nomination of Kuroda, 68, was widely expected. The Oxford-educated former vice minister of finance has criticised central bank policies in the past and backs Abe's strategy for reviving Japan's economy by fighting deflation through monetary easing and hefty government spending.
Kuroda's perceived alignment with Abe's views on the economy has drawn criticism that the Bank of Japan's independence could be undermined. Central bank autonomy, which aims to ensure monetary policy decisions aren't captive to the short-term considerations of political leaders, is enshrined in law in many countries. However, the deep economic malaise that followed the 2008 financial crisis has resulted in many central banks, the US Federal Reserve in particular, accommodating calls for unprecedented monetary easing.
Also as expected, the government proposed that Kikuo Iwata, a professor at Tokyo's Gakushuin University, and Hiroshi Nakaso, an executive director at the BOJ, to become the bank's top two deputy governors.
Kuroda is viewed as part of the global "currency mafia" in Japan. With his long experience and fluent English, he is accustomed to dealing with the world's major central banks and other financial leaders. During his years as Japan's top financial diplomat, he often decried the Japanese yen's rise against the US dollar, saying it did not reflect the fundamentals of the economy.
Despite frequent central bank interventions in the currency markets, the yen continued its long-term ascent thanks to its status as a safe-haven, and low interest rates that encouraged an international "carry trade" of borrowing in yen and using the money to invest in the bonds of countries with higher interest rates.
Abe's support for a weaker yen, to help support Japanese export manufacturers, has lifted share prices and spurred a decline in the value of the Japanese currency, which has weakened by about 20% against the US dollar since last fall.
The yen was trading at about 92.32 yen to the dollar by midday today, while the Nikkei 225 stock index had risen 1.9% to 11,462.63.
