Central Banks

Google Ad

Haruhiko Kuroda was reappointed for another five years as Governor of the Bank of Japan Friday in Japan's National Diet lower house. Koroda is a sprightly 73 and been in the job since 2013. The move was expected and contunes more of the same for Japan.

BOJ kuroda

While the Japanese economy today has changed considerably since Mr. Kuroda took over  in 2013 with his central role in Prime Minister Shinzo Abe’s revival plan the QE experiment has failed to ignite Japan. To be fair though growth has continued for the past eight quarters, the longest streak in 28 years; the Nikkei Stock Average has risen more than 70% during his term; and, the job market is tight.

Inflation is rising gradually toward the Bank ofJapan's 2% target, credited to the BOJ’s core policy of keeping interest rates low and even negative while flooding the banking system with cash by buying government bonds and stocks. The reality is the sheer flood of money and credit has not got the results hoped for though a new batch of analysts have short memories so it appears otherwise.

With all that Koruda has yet to achieve the one goal he advertised most loudly at the start of his term: 2% inflation. Core inflation is still less than 1%. Mr. Kuroda has repeatedly told Parliament, using the same language, that he will “persistently continue current powerful monetary easing.”

Even the Federal Reserve has been raising rates since December 2015, and the European Central Bank has cut back its government-bond buying. This week,we saw Japanese companies raise overall wages by about 3% in line with a request by Mr. Abe. Though like everything in Japan the figures aren't what they seem. The raises were inflated by temporary bonuses and regular seniority pay increases.

SMBC Nikko Securities chief economist Yoshimasa Maruyama in a note estimated the gains in base pay would remain about 0.9%. Inflation excluding fresh food and energy prices “is unlikely to rise stably above 1% when base salaries rise less than 1%,” said Mr. Maruyama. “It will likely make it difficult for the BOJ to conclude that price growth is moving smoothly toward its 2% goal.”

Five more years of that slow train in Japan when they have been pumping for the bullett train for years.

From The Traders Community News Desk

Log in to comment
Discuss this article in the forums (1 replies).