Shirakawa accelerates BOJ exit

By Korea Herald
  • Published : Feb 6, 2013 - 20:23
  • Updated : Feb 6, 2013 - 20:23
Bank of Japan Governor Masaaki Shirakawa will step down on March 19, almost three weeks before his term was due, accelerating a leadership transition that may aid Prime Minister Shinzo Abe’s campaign for aggressive easing.

Shirakawa, 63, will exit the same day as two deputy governors, he told reporters in Tokyo Tuesday. He was scheduled to leave on April 8. Japan’s currency slid, adding to losses against the dollar since Abe’s administration took office in December on a platform of greater monetary stimulus and a reversal of yen strength that hurts export competitiveness.

The outgoing governor assured the stability of Japan’s financial system with liquidity injections during the global credit crisis, and again in the wake of the record March 2011 earthquake and tsunami. At the same time, his failure to end the nation’s trenchant deflation stoked criticism from lawmakers, and ministers have pledged a replacement who shares Abe’s determination to end price declines.

“It’s the equivalent of waving a white flag for unconditional surrender,” said Shuichi Obata, senior economist at Nomura Securities Co. in Tokyo. “Shirakawa didn’t share the the government’s view that the central bank is responsible for ending deflation.”

The Nikkei 225 Stock Average gained 3 percent as of 10:42 a.m. in Tokyo on Wednesday. The yen touched its weakest level in almost three years against the dollar, 93.87. The currency slid 14 percent since mid-November, when the previous government announced plans to hold the December election.

“There was no pressure at all from the government, this was my own decision,” Shirakawa told reporters last night after a meeting with Abe, saying it was not an act of protest. He said he made the decision Tuesday so that the central bank’s new leadership could start together.

The short-list to replace him is probably composed of Asian Development Bank President Haruhiko Kuroda and former BOJ Deputy Governors Kazumasa Iwata and Toshiro Muto, according to Masaaki Kanno, chief economist at JPMorgan Securities Japan Co., who used to work at the central bank, writing in a note last month.

“The appointment of the next governor and deputies will be at the top of the government’s agenda now,” Kanno said Tuesday.

Shirakawa’s exit is part of a global changing of the guard, with Canada’s Mark Carney to take the helm of the Bank of England in July. In China, Governor Zhou Xiaochuan will step down next month, the China Securities Journal said Feb. 2. In the U.S., Janet Yellen may be a candidate to replace Chairman Ben S. Bernanke at the Federal Reserve a year from now.

Abe has repeatedly said that he wants the BOJ to take responsibility for the 2 percent inflation target it agreed to set last month. His government has defined ending deflation as central to efforts to revive the world’s third-biggest economy.

The central bank may be set for “a really fundamental policy shift,” said Richard Jerram, chief economist at Bank of Singapore Ltd., who has analyzed Asian economies for two decades. “When you have three new people in charge, they basically start from scratch.” (Bloomerg)

While the central bank last month announced plans for Federal Reserve-style open-ended asset purchases, they aren’t due to start until January 2014. The deputy governors leaving are Kiyohiko Nishimura and Hirohide Yamaguchi. (Bloomberg)