TOKYO (Reuters) - The Japanese government on Thursday nominated an academic known as an advocate of aggressive monetary easing to join the central bank’s divided policy board, tipping it more in favor of Governor Haruhiko Kuroda’s push for radical stimulus.
But the nominee, 64-year-old Yutaka Harada, has told Reuters the BOJ does not necessarily need to persist with its 2 percent inflation target, a view that contradicts the mainstream view of the BOJ and may complicate debate within the board.
Harada, a Waseda University professor, will replace Ryuzo Miyao, also an academic, whose five-year term ends in March.
“Harada is regarded as a reflationist who seeks to extricate Japan from deflation by boosting the economy through bold monetary policy,” said Kyohei Morita, chief Japan economist at Barclays Capital.
Markets have focused on who would succeed Miyao, who swung the board narrowly in favor of October’s surprise monetary easing that was decided by a 5-4 vote. The close vote has given greater significance to the board’s composition, as it suggested the difficulty Kuroda might face should he want to ease further.
Kuroda may have a stronger grip of the board with the addition of Harada, who wrote a book on how bold monetary easing can beat deflation with BOJ deputy governor Kikuo Iwata.
The government will have another chance to shift the board’s balance in favor of Kuroda when the term of Yoshihisa Morimoto, who voted against the October easing, expires in June.
For now, Harada’s appointment is unlikely to trigger an immediate shift in policy. Sources told Reuters that the BOJ has put policy on hold and found backing for its wait-and-see stance from Prime Minister Shinzo Abe’s advisers.
Harada told Reuters in an interview in January that the focus of monetary policy should be on stimulating the economy rather than achieving an inflation target, which should be considered only as a means for reflating growth.
“I think it’s okay even if the BOJ doesn’t achieve 2 percent inflation in fiscal 2015. It’s important, instead, to guide policy so that the economy can continue to grow around 2 percent,” Harada said in the interview.
The BOJ is caught in a bind, nearly two years into its stimulus experiment, as it further qualifies its inflation goals in response to tumbling oil prices, a move that could prove self-defeating by tempering price expectations.
Koya Miyamae, senior economist at SMBC Nikko Securities, said Harada may pave the way for the BOJ to make its price target and its time-frame more ambiguous.
The nomination must be approved by both houses of parliament to take effect, which is seen as a near certainty as Abe’s ruling coalition holds a strong majority in both chambers.
Additional reporting by Sumio Ito; Editing by Chris Gallagher and Richard Borsuk