Kishida orders BOJ chief not to mention unnecessary details

According to the Asahi Shimbun on Monday, Japanese Prime Minister Fumio Kishida met Bank of Japan (BOJ) Governor Haruhiko Kuroda and said, “Don’t mention anything unnecessary at the press conference,” before the central bank increased interest rates by raising the threshold of long-term government bond yields.

Some interpret his comments as Prime Minister Kishida’s order for the central bank to seek an exit strategy from the ultra-low interest rate policy. Analysts say that the 10-year “Abenomics,” which advocated quantitative easing to stimulate the economy, was put to an end due to Kishida’s strong will.

According to the Asahi Shimbun, Prime Minister Kishida made such a request at a meeting with BOJ Governor Kuroda at his residence on Nov 10. It is unprecedented for a prime minister to directly mention the future direction of economic policy to the central bank, to which independence from the administration is the key.

The prime minister’s remarks can be interpreted as aiming to put the brakes on Governor Kuroda’s comments that the BOJ “will not raise interest rates for some time. It may not be for some months, maybe 2-3 years.” Prime Minister Kishida may have thought that the Governor, whose term ends in April next year, ‘crossed the line’ when he hinted at maintaining the ultra-low interest rate policy.

As the BOJ has begun to take action to raise interest rates after Kishida put pressure on its chief, the majority of Japanese view that the BOJ will deliver a full-fledged exit strategy next year. Many believe that, when the new governor takes office in April next year, the BOJ will raise the policy rate (base rate) from 0.1 percent and reduce its large-scale government bond purchases.


sanghun@donga.com