Kuroda reappointed as Bank of Japan chief

In a widely expected move, the government of Prime Minister Shinzo Abe on Friday nominated the 73-year-old Bank of Japan (BoJ) governor to serve another five-year term when the current one ends in April.

If approved by parliament, this would make Haruhiko Kuroda the longest serving Bank of Japan (BoJ) chief in half a century, and would be a sign of Abe's ongoing confidence in the governor's ability to speed up Japan's economy.

Read more: Has Japanese PM's 'Abenomics' failed?

Kuroda was handpicked by Abe to steer the Asian economic powerhouse out of a decades-long cycle of falling prices and economic stagnation. The ex-president of the Asian Development Bank (ADB) took the helm at the BoJ in 2013 and has guided the key monetary plank of the prime minister's vaunted "Abenomics" economic policy.

He has adopted an ultra-loose monetary policy, which included massive asset purchases, known as quantitative easing (QE), and the BoJ's first-ever negative interest rates adopted in January 2016.

Track record

A perennial optimist in Japan's long-running war against deflation, Kuroda once famously invoked the spirit of Peter Pan, the boy who never grew up, by saying: "The moment you doubt whether you can fly, you cease forever to be able to do it."

"Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions," he added.

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However, Kuroda so far has failed in his mission to hit the BoJ's inflation target of two percent, with the most recent figure being 0.9 percent in December. Nevertheless, he can point to more success recently on economic growth as Japan currently enjoys its longest unbroken spell of quarterly growth since the late 1980s.

Read more: Japan logs longest phase of growth in 16 years

Nevertheless,he will most likely come under fire from some opposition lawmakers, who say the government's massive bond purchases have left the country vulnerable, and that the BoJ's negative interest rate policy is hurting commercial banks. Moreover, his push to lower the value of the yen has led to some criticism that the recovery was too dependent on exports that have been boosted by a weaker currency.

Safe pair of hands

Market experts believe that Kuroda's greatest future challenge will be exiting the easy money policy given that inflationary pressure is building up as the economy gathers speed.

But for now he is expected to stay the course after telling parliament on Friday that while the country's economy is gradually expanding, price movements remain weak. "Considering there is some distance to the two percent price-stabilization target, it's not the time for an exit from government bond-buying," he said.

After the news of Kuroda's reappointment broke, the yen edged slightly higher against the dollar, as traders voiced relief at the move.

Tobias Harris, from the Washington-based Teneo Intelligence, told the news agency AFP: "Appointing a new central banker would introduce new uncertainty into the markets at a time when volatility is increasing due to monetary policy change in the US."

And Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, added that the nomination gave investors relief that the BoJ's monetary policy was not derailed. "It sent a message to the market that the main part of Abenomics will not change," he told Reuters news agency.

The selection of the new Bank of Japan leadership comes amid heightened anxiety in Japanese and global financial markets on speculation major central banks will soon wind down their crisis-era policies.

uhe/aos (Reuters, AFP, dpa)