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Kuroda’s work not done on deflation

Yomiuri Shimbun file photo

Haruhiko Kuroda

The Yomiuri ShimbunPrime Minister Shinzo Abe is set to reappoint Bank of Japan Gov. Haruhiko Kuroda.

The move is thought to have been prompted by Abe’s confidence in Kuroda, 73, as a stable manager of monetary policy, which is key to steering the economy.

However, the nation’s exit from deflation through large-scale monetary easing remains incomplete. Kuroda may face difficult decisions over whether to reexamine the monetary-easing policy, among other issues.

It has long been assumed that Kuroda would be reappointed because of his work with the government to end deflation, resulting in steady economic growth, a surge in the Nikkei Stock Average and improvements in employment conditions.

Kuroda took up his post in March 2013. The next month, he introduced the large-scale monetary easing program dubbed different-dimension monetary relaxation. The program became a pillar of Abe’s Abenomics economic policy package.

There are no strong rivals to the Bank of Japan governor, and a source close to the government said, “From the beginning, there’s been no other choice but to reappoint Gov. Kuroda.”

Should both the House of Representatives and House of Councillors approve the reappointment, Kuroda’s term as central bank governor would exceed five years, which is unusually long.

His most important task remains guiding the nation out of deflation. The inflation target of 2 percent has not been achieved, and the timeline for achieving the goal has been postponed to “around fiscal 2019.”

The negative interest rate policy introduced in February 2016 has also negatively impacted financial institutions’ profits, and has constrained their lending capabilities.

Many have criticized the policy for its adverse effects on the broader economy. The Bank of Japan chief may be forced into a discussion on revising the monetary-easing policy framework.Speech

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