COMMENTARY: New BOJ Chief Faces Hangover from Kuroda’s 10-Year Party

The Bank of Japan (BOJ) has been called out for disregarding the principle of central bankers, preventing customers from becoming intoxicated in economic booms. Bank of Japan Governor Haruhiko Kuroda, who will be replaced in April, failed to meet the inflation target of 2 percent within two years, despite declaring it ten years ago. Instead, Kuroda, the longest-serving BOJ chief, stuck with monetary easing to raise commodity prices, thus failing as a “watchdog” of such costs. This strategy seems to be at odds with other industrialized nations’ central banks, which are rushing to tighten credit.

Behind the Government’s Decision

The Kishida administration recently nominated economist Kazuo Ueda, 71, for the next BOJ governor, although Deputy Governor Masayoshi Amamiya, 67, had been widely seen as Kuroda’s successor. The government’s decision stemmed from citizens’ disillusionment with BOJ’s dramatic monetary easing measures while commodity prices continued to rise. The BOJ watched the prices soar and did nothing, breaking the principle of central bankers. The Kuroda regime failed to apply the brakes on Japan’s economic party, and the next chief was left with a hangover from his party’s excesses.

Related Facts:

• BOJ Governor Haruhiko Kuroda ignored the principle of central bankers, which aims to prevent customers from becoming intoxicated in economic booms.
• BOJ’s experimental strategy of issuing banknotes and e-money to enliven the “party” fell flat, leaving some people in dire straits amid the global wave of inflation.
• Kuroda admired himself for his “successful monetary relaxation” during a news conference following his final policy-making meeting on March 10.
• Other countries’ central banks are rushing to tighten credit, unlike the BOJ’s strategy to raise commodity prices through monetary easing.

Key Takeaway:

The newly appointed BOJ chief is tasked with correcting the excesses of Kuroda’s party, which led to rising commodity prices without the necessary check and balance mechanisms. Tightening credit policies, such as raising interest rates, is an appropriate measure to prevent excessive economic booms, and a sober approach is needed to avoid crashes and busts. In addition, the new chief will face the monumental task of rebuilding confidence in the BOJ, which has gone on for too long without any intervention.

Conclusion:

The Bank of Japan’s failure to apply the brakes on Japan’s economic party has left the next chief with the hangover of his predecessor’s decade-long excess. Kuroda’s experimental strategy falls flat, breaking the principle of central bankers, which aims to prevent customers from becoming intoxicating during economic booms. The next BOJ chief must tighten credit policies and implement check and balance mechanisms to avoid excessive booms and busts.