Analysis: Mr. Exit or Mr. BOJ? The race for’s top job in Japan heats up

A man wearing a protective mask stands outside the Bank of Japan headquarters amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

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  • Both Nakaso and Amamiya have deep expertise in BOJ affairs
  • Neither is likely to seek a quick exit from easy politics
  • Difference in approaches, background may affect timing of discharge
  • Nakaso lays out BOJ exit plan, criticizes ‘Abenomics’
  • Amamiya is seen more as a political dove but could change course

TOKYO, June 13 (Reuters) – The decision on who will be the next head of the Bank of Japan is likely to center on two career central bankers whose different political approaches and backgrounds could affect the timing of an eventual exit from politics ultra-accommodating monetary policy.

As outgoing former deputy governors, Hiroshi Nakaso and Masayoshi Amamiya have deep expertise in central bank affairs, making them a sure pair of hands to guide a future exit from ultra-low interest rates. , however distant.

Long touted as frontrunners in the race for the BOJ leadership, neither would rush into monetary policy tightening given the fragility of the Japanese economy and the need to keep the cost of funding its huge public debt, say five former incumbent policymakers who worked with or under them.

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But the two could differ on when the BOJ should undo a complex framework of policies that combine huge asset purchases, negative short-term interest rates and a 0% yield cap that makes Japan an outlier amid a global rush to raise rates, they say.

“Nakaso belongs to a camp that thinks central banks shouldn’t intervene too deeply in markets, while Amamiya seems more flexible,” said Nobuyasu Atago, a former BOJ official who is now chief economist at Ichiyoshi. Securities.

“The main difference is in their views on how far central banks should push the limits of monetary policy.”

Prime Minister Fumio Kishida’s selection of a successor to BOJ Governor Haruhiko Kuroda, whose term ends in April next year, is expected to intensify after an upper house election in July.

A ruling party victory, which seems a virtual certainty due to weak opposition, would strengthen Kishida’s grip on power and allow him to differentiate his policy from the former prime minister’s ‘Abenomics’ economic stimulus. Shinzo Abe.

That may work in favor of Nakaso, who has criticized Abenomics for being too reliant on monetary policy and has repeatedly warned of the cost of prolonged easing.

In a recently published book, Nakaso detailed how the BOJ could end an ultra-loose policy: increase interest paid on excess reserves of financial institutions, stop reinvesting money from bonds when they mature and gradually reduce the bank’s balance sheet to levels where market functions recover.

“If the public accepts more of higher prices, interest rates will come under upward pressure and allow the BOJ to normalize monetary policy,” he told Reuters. Read more

Nakaso is currently president of the Daiwa Institute of Research, a private think tank.

An overview of the position of the members of the Board of Directors of the Bank of Japan on political issues. BOJ Board as of May 19, 2022.

By contrast, Amamiya, as Kuroda’s right-hand man, has always preached the need to keep rates rock-bottom to sustain growth, even if that meant straining financial institutions’ margins and draining market liquidity.

Unlike Nakaso, whose career has centered on international and market affairs, Amamiya spent most of his years at the BOJ drafting monetary policy ideas. He is known for orchestrating many unconventional monetary easing measures which earned him the nickname “Mr. BOJ”.


Certainly, Kishida could opt for a dark horse with no experience in monetary policy. The uncertainty surrounding the economic and inflation outlook could sway the monetary policy stance one way or the other, regardless of who takes the helm of the BOJ.

Some analysts also caution against calling Amamiya an outright political dove. In a speech in 2017, he highlighted “many criticisms and concerns” about the risk that the BOJ’s yield cap policy would force it to fund public debt and make it difficult for a future exit from an ultra-debt policy. lax.

As a senior BOJ executive, Amamiya played a key role in shifting the BOJ’s policy focus in 2016 to interest rates relative to the pace of money printing – avoiding the bank’s buy bonds at a set rate.

He was also deeply involved in a policy review last year, when the BOJ dropped its promise to buy risky assets aggressively.

“If need be, he can easily change course as he is a pragmatist, rather than someone who clings to beliefs about the path the BOJ should take,” one of the sources said of the interview. ‘Amamiya.

“One thing is certain – whoever gets the job will face the daunting task of sorting out Kuroda’s recovery plan,” said Atago of Ichiyoshi Securities.

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Reporting by Leika Kihara; Editing by Sam Holmes

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