By Leika Kihara
(Reuters) – Japan’s government is likely to present its nominees for the next Bank of Japan (BOJ) governor and two deputy governors on Feb. 10, sources have told Reuters, a choice that will affect how soon the central bank could dial back its massive stimulus.
The nominees, if approved by both houses of parliament, will succeed BOJ Governor Haruhiko Kuroda and his two deputies, Masayoshi Amamiya and Masazumi Wakatabe.
Kuroda’s term ends on April 8, while those of Amamiya and Wakatabe expire on March 19.
Below are possible candidates for the posts:
MASAYOSHI AMAMIYA – VERY STRONG CONTENDER FOR GOVERNOR
Currently deputy governor, Amamiya has spent most of his career at the central bank drafting monetary policy ideas and is nick-named “Mr. BOJ” for masterminding many of the bank’s unconventional monetary easing ideas.
He played a key role in drafting Kuroda’s huge asset-buying programme in 2013 and consistently called for keeping ultra-low interest rates. But he also said in July the BOJ must “always” think about the means of exiting ultra-loose monetary policy.
An avid fan of classical music, Amamiya is known for his deep contacts with lawmakers and bureaucrats that help him read which way the political wind is blowing in steering policy.
HIROSHI NAKASO – VERY STRONG CONTENDER FOR GOVERNOR
A career central banker who served as deputy governor until 2018, Nakaso played a key role in navigating an exit from the BOJ’s first spell of quantitative easing in 2006.
With long experience overseeing the BOJ’s market operations and international affairs, Nakaso has repeatedly warned of the drawbacks of prolonged monetary easing such as the distortion its huge presence could create in bond and money markets.
Nakaso laid out his idea of an exit from ultra-easy policy in a book published in May. Under that plan, the BOJ would first ditch its 10-year bond yield target, then raise short-term interest rates and finally move to reduce its balance sheet.
HIROHIDE YAMAGUCHI – POSSIBLE CONTENDER FOR GOVERNOR
A career central banker, Yamaguchi served as one of the two deputies of former BOJ Governor Masaaki Shirakawa and played a key role in crafting an asset-buying scheme under which the bank first began purchasing exchange-traded funds (ETF) in 2010.
Since retiring from the BOJ in 2013, he has criticised Kuroda’s stimulus as relying too much on the view central banks can influence public perceptions with monetary policy.
Warning of the rising cost of prolonged easing, Yamaguchi has also called for ending the BOJ’s huge asset purchases and abandoning an yield cap he describes as unsustainable.
MASATSUGU ASAKAWA – POSSIBLE CONTENDER FOR GOVERNOR
Like Kuroda, Asakawa formerly had the role of Japan’s top financial diplomat, a job he took in 2015 and kept for four years. During that time, he battled a strong yen and engaged in tough negotiations with then U.S. President Donald Trump’s administration on currency policy.
After retiring from the finance ministry, he became president of the Asian Development Bank in 2020 – a job Kuroda also took before becoming BOJ governor.
In his book, Asakawa praised Kuroda’s stimulus programme as a right move to beat deflation. He also said yen declines would be harder to stop than yen rises via currency intervention, because the amount of foreign currencies Japan can sell to prop up the yen would be limited to the size of its foreign reserves.
DARK HORSE CANDIDATES
Traditionally, the BOJ and the finance ministry take turns filling the central bank governor post, holding the post for only a single five-year term. That broke when Kuroda was appointed in 2018 to serve a second five-year term.
If history is any guide, the next BOJ governor would be chosen from the central bank’s ranks. But there is a chance Prime Minister Fumio Kishida opts for a dark horse candidate.
Among names floated by analysts are Columbia University professor Takatoshi Ito, who is close to Kuroda, and former top currency diplomat Takehiko Nakao.
Given Kishida’s close ties with the finance ministry, he may hand-pick a former top bureaucrat from the institution, though there is no consensus on who could be among strong candidates.
SHINICHI UCHIDA – POSSIBLE DEPUTY GOVERNOR
A career central banker who spent most of his career at the elite monetary affairs department, Uchida landed a rare reappointment for a second, four-year term as the BOJ’s executive director overseeing monetary policy. Many analysts see the reappointment as a sign he could fill one of the two deputy governor posts.
Together with Amamiya, Uchida played a key role in drafting many of Kuroda’s policies including the introduction of negative interest rates and yield curve control in 2016.
People who know him say Uchida firmly believes that the BOJ must maintain ultra-loose policy to reflate growth and tighten the job market enough so that wages rise more.
TAKEO HOSHI – POSSIBLE DEPUTY GOVERNOR
An economics professor at the University of Tokyo, Hoshi is well-versed in Japanese monetary policy and is a regular member of government panels and the BOJ’s academic workshops.
At one of the BOJ workshops held in November, Hoshi explained how structural changes in Japan’s labour market could push up average wages more than in the past.
“The BOJ must start worrying about the possibility of inflation accelerating more than expected,” he told Reuters, adding the BOJ may abandon its yield cap as early as this year.
FEMALE DEPUTY GOVERNOR CANDIDATES
No female has yet served as BOJ deputy governor or governor, a tradition Kishida may seek to change to enhance diversity.
One possible candidate is Tokiko Shimizu, who rose up the ranks in the male-dominated institution and now serves as executive director overseeing international affairs. People close to her describe Shimizu as dovish on monetary policy.
Other candidates include think tank head Yuri Okina, who calls for phasing out the BOJ’s yield cap, and former BOJ board member Sayuri Shirai, who proposes a review of the current stimulus so the bank can adjust interest rates more flexibly.
FINANCIAL BUREAUCRAT DEPUTY GOVERNOR CANDIDATES
If a former BOJ executive becomes governor, there is a strong chance one of the deputy governor posts will be filled by top finance ministry bureaucrats such as Shigeaki Okamoto and Yasushi Kinoshita.
Kinoshita told Reuters the BOJ should eventually head for an exit from ultra-loose policy, and in doing so must move “cautiously and steadily” to avoid causing huge market turbulence.
Ryozo Himino, a former head of Japan’s financial watchdog, is also considered a dark horse candidate. People close to him describe Himino as critical of the BOJ’s negative rates policy for the damage it is inflicting on commercial banks’ profits.
(Reporting by Leika Kihara; Editing by Sam Holmes)
