Haruhiko Kuroda sticks to his guns in the last Bank of Japan meeting after the ‘bazooka’ decade.

After a decade of leading the Bank of Japan and implementing aggressive monetary policies, Haruhiko Kuroda has declared his strategy a “success.” In his final policy board meeting, Kuroda kept overnight interest rates at negative 0.1% and maintained the bank’s bond-buying policy to control yields. But as Kuroda prepares to step down next month, his successor Kazuo Ueda will face the task of exiting negative interest rates while pursuing the bank’s elusive inflation target.

Notable Points:

• Kuroda’s ultra-loose monetary policy has helped Japan bring about job growth and the end of deflation, but the 2% inflation target was not hit sustainably.
• Ueda is the first academic to lead the central bank and has indicated that the BoJ’s policy of capping long-term government borrowing costs through vast bond purchases was unlikely to survive in its existing form.
• While Japan’s core consumer price index has surpassed the BoJ’s target for nine months, there remains uncertainty over the country’s price outlook.
• Kuroda has expressed hope that Ueda will demonstrate his skills in stabilizing prices and the country’s financial system.

Related Facts:

• Kuroda became associated with the term “bazooka” after using unconventional and aggressive monetary policies to boost Japan’s stagnant economy.
• Ueda, a former BoJ board member, has not desired to change Japan’s negative interest rates but has signaled that yield curve control is unlikely to continue in its current form.
• Japan’s core consumer price index rose in January, surpassing BoJ’s target for nine consecutive months.

Key Takeaway:

Kuroda leaves the Bank of Japan with an incomplete mission of sustainably hitting the elusive 2% inflation target. While his successor Ueda does not seem in a rush to change negative interest rates, the strategy for capping long-term government borrowing costs is likely to change. The country’s price outlook remains uncertain despite the recent rise in consumer prices.

Conclusion:

Kuroda has been key in implementing unconventional monetary policies to kickstart Japan’s stagnant economy. However, while his policies have helped create jobs and end deflation, the country has yet to reach its inflation target sustainably. As Ueda takes over the central bank, his approach will likely differ. Still, the challenge remains: finding a strategy to bring about sustainable growth and inflation in Japan.