Japanese Prime Minister Fumio Kishida has kept financial markets guessing on who will replace Haruhiko Kuroda as the next governor of the Bank of Japan. Kishida said that he will take the April economic situation into account when choosing the next governor. Kuroda’s five-year term ends on April 8th, along with the terms of his two deputies, both ending on March 19th.
The nomination needs approval from both chambers of parliament to take effect. The government must decide early to give parliament time to approve Kishida’s pick before Kuroda’s term expires.
Speculation among market players is that the central bank may shift away from its stimulus policy when the BOJ leadership changes. Some also speculate about changes to the policy accord between the central bank and the government, in which the BOJ pledges to achieve its 2% inflation target at the earliest possible time.
“The BOJ and the government have been working as one to achieve economic growth that involves structural wage hikes and reach the price-stability target stably and sustainably,” Kishida said. “This basic stance won’t change.”
Appearing on a TV Tokyo program, Kishida said it’s too early to comment on whether there’s a need to alter the policy accord between the government and the central bank.
Inflation is at 41-year highs, markets have been testing the BOJ’s commitment to Kuroda’s ultra-loose monetary policy. The BOJ stunned markets last month by doubling the allowed band to 50 basis points either side of its 0% 10-year yield target. As a result, the 10-year yield cap is now set at 0.5%.
