Kuroda Leaves Japan’s Central Bank Marking End Of An Era

Japanese Prime Minister Fumio Kishida will nominate a new head of the BoJ perhaps as early as February.

Haruhiko Kuroda’s tenure as governor of the Bank of Japan (BoJ) is coming to an end on April 9.

Kuroda’s 10-year reign, which consisted of two five-year terms, is the longest in the BoJ’s 140-year history. It’s also marked by one of the most zealous stimulus programs, leading to ultralow interest rates and the BoJ becoming the largest owner of stocks and government bonds in Japan.

Japanese Prime Minister Fumio Kishida will nominate a new head of the BoJ perhaps as early as February. Three main candidates are in the running: Masayoshi Amamiya, Hiroshi Nakaso and Hirohide Yamaguchi.

Amamiya has been deputy governor of the BOJ since 2018; his tenure will end on March 19. Nakaso, deputy governor of the central bank from 2013 to 2018, is currently chairman of Fin.City Tokyo, an organization that promotes Japan’s capital as a financial center. Yamaguchi, meanwhile, was the deputy governor of the BoJ between 2008 and 2013. So, who will replace Kuroda?

Traditionally, governors of the BoJ alternate between former officials of the Ministry of Finance (MoF) and the central bank, Japan expert Jesper Koll says. Since Kuroda hails from the MoF, it’s time for someone from the BoJ. All three candidates fit the bill, but Yamaguchi is the outsider, given his criticisms of PM Kishida’s policies.

The successor’s priorities should align with the BoJ’s priorities—central bank independence and liberalized capital markets. By contrast, the MoF “is more interested in controlling markets and prioritizing low debt costs,” explains Koll. 

The BoJ has already started to signal a transition from kuroda’s “extraordinary” monetary policy: long-term bond yields will be allowed to rise further; the 10-year yield is likely to expand from the current 0.5% to 2.5%; and the country’s three-decade long deflation period is set to end, Koll predicts.