Ex-BOJ chief pushed board into powerful monetary easing: 2013 minutes

Former Bank of Japan Governor Haruhiko Kuroda took the unusual step of setting the tone for other policy board members before soliciting their views when the central bank decided to embark on powerful monetary easing in 2013, minutes showed Monday.

Kuroda, who helmed the organization over the following decade without achieving his pledged aim of reaching its 2 percent inflation target in a "stable and sustainable way," told an April 2013 meeting that the BOJ should enter a "new dimension" in easing policy.

"We will do all that we can. That is, we will not deploy policy tools at our disposal one by one," the minutes showed Kuroda telling other members of the Policy Board.

The minutes show how Kuroda, a former top currency diplomat and president of the Asian Development Bank, sought to differentiate himself from his predecessor Masaaki Shirakawa.

Shirakawa, who served as BOJ chief between 2008 and 2013, was criticized, particularly by politicians, for unveiling policy steps only in increments at a time when Japan was struggling against the impact of a strong yen.

The BOJ releases full minutes of policy meetings a decade after they are held. Monday's release encompassed the January-June half of 2013.

After the April 3-4 meeting, the BOJ said it will enter "a new phase of monetary easing both in terms of quantity and quality." It decided to double government bond buying and the size of the monetary base, pledging to achieve 2 percent inflation in about two years.

A spate of unprecedented policy steps aimed at putting an end to Japan's chronic deflation later became known as the "Kuroda bazooka," lifting Japanese share prices and weakening the yen. The BOJ's bold monetary easing was a key pillar of then Prime Minister Shinzo Abe's economy-reviving "Abenomics" program.

The BOJ's Policy Board has nine members -- the governor, two deputy governors and six other members. It is customary for the governor, who chairs policy-setting meetings, to give each member an opportunity to state their view and facilitate discussion before they reach an agreement.

"We need to change expectations in financial markets and the broader economy by communicating (the central bank's stance) in a clear-cut way," Kuroda was quoted as saying at the 2013 meeting.

A decade later, the BOJ remains committed to monetary easing, with its holdings of government bonds already more than half of the total outstanding debt. Its bloated balance sheet will pose a challenge to the central bank when it decides to normalize policy.

The release of the minutes coincides with what could be an early symbolic step in the BOJ's shift away from monetary easing as it decided Friday to loosen its control on long-term yields in a tweak of the controversial program launched during Kuroda's tenure in 2016.

Japan's inflation rate has come in above the BOJ's 2 percent target for more than a year, due in large part to the effects of higher import prices, amplified by the yen's sharp drop. Kazuo Ueda, the current BOJ chief, has stressed his commitment to persisting with the existing policy framework in hopes of finally achieving stable inflation accompanied by sustainable wage growth.

The 2 percent inflation target was introduced in January 2013 amid growing political pressure. Shirakawa, who was BOJ chief at the time, was skeptical about introducing the goal before it was enshrined in a joint accord with the government.

At the central bank's meeting in January 2013, Shirakawa was quoted as saying, "Just setting a 2 (percent) target alone will not raise the inflation rate." Still, he agreed to a joint statement with the government that states the BOJ will aim to achieve the goal "at the earliest possible time."

The BOJ's independence came under threat around the time the Liberal Democratic Party returned to power and Abe began his second term as Japan's prime minister in late 2012. Abe urged the central bank to ramp up stimulus to defeat deflation.

In chairing his last policy meeting as governor in March 2013, Shirakawa warned of an excessive reliance on monetary easing, after the BOJ faced political pressure to ease its monetary grip and was forced to ramp up government bond-buying, the minutes showed.

Shirakawa recently criticized the past decade of monetary easing under his successor Kuroda as having only a "modest" impact on inflation and economic growth, based on the view that it was treated as a quick fix to structural problems that required more robust reforms.

In an International Monetary Fund magazine published in March, he called on central bankers to reflect on the reason for and consequences of prolonged monetary easing.

Kuroda, meanwhile, said it was "regrettable" that the 2 percent inflation goal was not achieved in his preferred way but the policy steps taken under his tenure were appropriate, during the final press conference of his record-long time as governor.

Kazuo Momma, a former executive director at the BOJ who was involved in the preparation of the 2013 joint accord with the government, recalled that he did not expect the unprecedented monetary easing under Kuroda would have huge positive effects on the economy in an already low-interest rate environment.

"It sounds ironic, but the new phase of monetary easing clearly showed to the government, experts and the people of Japan that monetary policy alone had its limits," said Momma, now executive economist at Mizuho Research & Technologies.

The BOJ is carrying out a comprehensive review of its monetary easing over a quarter century under Ueda, an academic well-versed in monetary policy who became BOJ governor in April.

© Kyodo News