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Japan’s unlikely economic rescuer

When he retired in 2003 from the Finance Ministry where he had spent 36 years, Haruhiko Kuroda was looking forward to a sedate career in academia.

Born in southern Kyushu prefecture, Japan’s newly minted central bank governor devours books on mathematics, economics and philosophy in his spare time and enjoys swimming and traveling.

He has a law degree from the University of Tokyo, Japan’s most prestigious college, and a master’s degree from Oxford.

But after teaching economics at Hitotsubashi University in Tokyo for two years, Kuroda was nominated by his government to head the Manila-based Asian Development Bank.

“I have to serve 63 countries rather than one country. This is a big difference,” he said in an interview shortly after assuming the post.

Earlier this year, when Prime Minister Shinzo Abe wanted him to head the Bank of Japan, Kuroda cut short his second five-year term at the ADB and headed home.

Even when he was the nation’s chief currency official ― his final post at the Finance Ministry ― Kuroda had advocated looser monetary policies.

He had nothing to lose by bashing the BOJ. For when retired finance officials were chosen to head the BOJ, only those who had held the most senior post ― equivalent to permanent secretary ― were given the plum job.

Kuroda, who will turn 69 in October, was not in their league. However, when Abe was looking around last December for someone who shared his views to head the central bank, Kuroda emerged as the favorite candidate.

Back when Kuroda was teaching economics, he also served part-time as special adviser to then-Prime Minister Junichiro Koizumi. It was then that Kuroda first crossed paths with Abe, a deputy chief cabinet secretary at the time.

Shortly after the New Year, Abe asked to meet Kuroda. It did not take much to persuade Kuroda to go for the central bank job.

There was just one snag.

The opposition parties, whose endorsement of Kuroda’s candidacy was crucial, initially vowed to bar all former top finance mandarins from the post.
Bank of Japan Governor Haruhiko Kuroda. (Yomiuri Shimbun)
Bank of Japan Governor Haruhiko Kuroda. (Yomiuri Shimbun)

However, Kuroda’s eminent suitability won the day. His familiarity with the global fraternity of central bankers and his readiness to work with Abe to lick the country’s 15-year-long deflation swayed his critics.

The fact that he had never held the senior-most job in the Finance Ministry was also in his favor.

Installed as BOJ governor on March 19, Kuroda proceeded to declare all-out war on Japan’s growth-stunting deflation.

His first task on April 4 was to announce bold monetary easing steps that included expanding the central bank’s purchase of government bonds and doubling the monetary base in two years.

Market reactions were nothing short of dramatic. Immediately, stock prices rose to their highest levels since September 2008 and the Japanese yen fell to a 3½-year low against the U.S. dollar.

The same day, Kuroda invited economists to the bank to explain his policies, something his predecessor Masaaki Shirakawa would never have done.

Unlike the stony-faced Shirakawa, Kuroda has a reputation as a communicator.

Though his future pronouncements will be closely watched, he has vowed not to tweak his policies unnecessarily.

“Having made such a major shift (in monetary policy), we need to carefully ascertain the effects. We’re not going to be making adjustments month after month,” he said last week.

The central bank aims to achieve its 2 percent inflation target in two years, a timeframe that many observers feel may be too short.

While the BOJ’s new policies were quickly felt in financial markets, it will take longer for their impact to be seen in corporate investments and consumer spending, both of which need to rise for the economy to recover.

So far there has been nothing but praise for Kuroda.

The Wall Street Journal called him Japan’s Bernanke, a reference to Ben Bernanke, chairman of the U.S. Federal Reserve, who conducted aggressive asset purchases in three rounds of quantitative easing starting in 2008.

“If the BOJ is going to join Mr. Bernanke’s global reflation play, it might as well go all the way. Then Japan could focus on deregulation and trade opening so businesses are forced to invest in becoming more productive,” the WSJ said in an editorial.

Nobel laureate and Columbia University economist Joseph Stiglitz called Kuroda “one of the best-known Japanese economists in the world” in an interview last month with the NHK network.

“I can feel his eagerness to put Japan back on a growth path as soon as possible,” said Stiglitz.

By Kwan Weng Kin

(The Straits Times)
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