* Kuroda long considered a strong candidate to lead BOJ
* Academic Iwata, BOJ's Nakaso also tapped for BOJ board
* PM Abe is shifting BOJ to more aggressive easing stance
* BOJ Kiuchi: asset buying remains key for future easing
By Kaori Kaneko and Leika Kihara
TOKYO, Feb 28 Prime Minister Shinzo Abe
nominated an advocate of aggressive policy action to head the
Bank of Japan, challenging the opposition to back his push for
radical action as officials warned that a nascent economic
upturn could easily be derailed.
By choosing Asian Development Bank President Haruhiko Kuroda
to take over at the central bank, Abe is looking to deliver on
an election pledge of overhauling monetary policy to revive the
economy after nearly two decades of mild deflation and
"The new BOJ needs to accelerate its pace of asset
accumulation and extend the maturities of government debt that
it is buying," said Masayuki Kichikawa, chief Japan economist at
Bank of America Merrill Lynch.
"By strengthening monetary easing, the BOJ will be able to
stabilise the yen exchange rate. Then we will begin to see some
positive impact on consumer prices from next year."
Academic Kikuo Iwata, who supports unconventional monetary
policy, and BOJ official Hiroshi Nakaso, who has hands-on
knowledge of the central bank's inner workings, were nominated
as BOJ deputy governors on Thursday.
Abe has already successfully pushed for changes at the
central bank, which last month doubled its inflation target to 2
percent and agreed to an open-ended asset buying programme from
2014, and the new leadership team is expected to push for even
more aggressive action.
The nominations were no surprise to investors, having been
well flagged recently, and there was little market reaction.
The three men need to be approved by both houses of
parliament. Abe does not have a majority in the upper house, and
needs opposition support for his BOJ picks to take office next
Jiji news reported that Kuroda's confirmation hearing would
be on March 4, with the two nominees for the deputy positions to
appear before lawmakers the following day.
At a meeting after the nominations were announced, members
of the opposition Democratic Party were divided over whether to
endorse Kuroda, but a decision could come as soon as March 5,
party representatives said.
Soon after the nominations were announced, the challenge
facing the three was laid out as the finance minister and a BOJ
board member both said that despite positive signs, a recovery
in the world's third-largest economy was by no means certain.
WATCHING THE YEN
Japan's economy has contracted for the past three quarters,
but there have been some signs of life in recent data, including
consecutive rises in factory output and signs of a pick-up in
the country's export engine.
A major factor behind hopes of recovery has been the sharp
fall in the yen against the dollar to near three-year lows this
month, driven by Abe's promises of radical fiscal and monetary
However, a 3 percent jump in the yen on Monday, as worries
about Italy's election drove investors back to the safe haven of
the Japanese currency, has alarmed policymakers who are
concerned about the fragility of the recovery.
Finance Minister Taro Aso said he was keeping a close eye on
the yen, and a BOJ board member said there was uncertainty that
the economy would make a full-fledged recovery.
"We will continue to monitor currency moves and make sure
the economy recovers by encouraging private investment, jobs
growth and an expansion in wages," Aso told parliament.
A weaker yen benefits Japan as it makes exports more
competitive and eases deflation by pushing up import prices,
although it does weaken its trade and current account balances.
BOJ board member Takahide Kiuchi told business leaders that
future stimulus would most likely be through expanding the BOJ's
asset-buying and lending programme, although other measures
being proposed in markets, such as buying riskier assets, could
"We will strive to achieve our new target, including through
taking additional easing steps boldly when necessary," said
Kiuchi, one of two board members to vote against adopting the 2
percent inflation target last month.
A deadline for reaching 2 percent inflation should not be
set, Kiuchi also said, which contrasts with Kuroda's view that
it can be met in about 2 years.
Most economists polled by Reuters recently did not expect
inflation to reach the target in the next five years.
Kuroda, 68, would replace current governor Masaaki
Shirakawa, 63, who is due to leave office on March 19 along with
the two deputy governors.
A former finance ministry bureaucrat who oversaw yen-selling
intervention from 1999 to 2003, Kuroda has said the BOJ should
not buy foreign currency bonds as that constituted currency
On Thursday, Aso was also cautious on such a policy, saying
it could be seen as currency intervention and in breach of
agreements with other governments.
Kuroda does support increased purchases of government bonds
and other domestic assets, such as corporate bonds or exchange
traded funds (ETFs), to pump cash into the economy.
In contrast, Iwata prefers buying more longer-dated
government bonds over purchases of corporate bonds or ETFs.
Nakaso, who currently oversees the BOJ's international
operations, may not feature prominently in policy setting.