TOKYO (AFP) ― The Bank of Japan wrapped up its last policy meeting under governor Masaaki Shirakawa on Thursday, announcing no fresh policy measures but offering an upbeat assessment of the economy.
The BOJ, which also left rates unchanged at zero to 0.1 percent, said the world’s third-largest economy has “stopped weakening” and is “expected to level off more or less for the time being.”
The bank was widely expected to take no action as Shirakawa gets set to step down about three weeks before the end of his term, following public sparring with the nation’s premier over policy.
Shirakawa’s departure on March 19 heralds the start of what could be a major policy shift for the central bank as the government demands action to stoke the listless economy.
His likely replacement, Haruhiko Kuroda, a finance veteran and former Asian Development bank head who is a strong supporter of monetary easing, is likely to be confirmed by parliament in the coming weeks.
The 68-year-old Kuroda has long criticized the BOJ for doing too little to lift the economy, and is seen as likely to lead a fresh drive for more spending and aggressive easing to beat deflation, putting him squarely in Prime Minister Shinzo Abe’s policy camp.
A man walks past the Bank of Japan headquarters in Tokyo. (Bloomberg)
On Monday, Tokyo’s nominee for the BOJ’s top job said he would do “everything possible” to tackle the falling prices that have weighed on Japan’s growth since the 1990s, crimping spending and business investment.
Abe cruised to a landslide victory in December elections on pledges to reverse Japan’s fortunes with a mix of big spending and aggressive monetary easing, a prescription that put him on a collision course with Shirakawa.
The conservative premier had openly said he would like to turf out Shirakawa, and threatened to change a law mandating the bank’s independence if it did not fall into line, stirring protest from central bankers abroad.
In January, the under-pressure BoJ bowed to government demands, announcing an unlimited easing program to start from next year and two-percent inflation target.
The asset purchase policy is similar to the U.S. Federal Reserve’s unlimited monthly bond-buying program, known as quantitative easing.
The BOJ meeting “has of course been overshadowed by the imminent departure of Governor Shirakawa and his two deputies,” London-based Capital Economics said in a note before the meeting ended.
Japan’s recession-hit economy shrank for the third consecutive quarter in the October-December period while Tokyo logged a record trade deficit in 2012, underlining the job head for Abe and his expected team at the central bank.
However, the BOJ’s comments Thursday suggested that a slump in exports, hit by weak demand in Europe and a consumer boycott of Japanese goods in China stemming from a territorial spat, were turning the corner.
“Exports appeared to stop decreasing” as hard-hit overseas economies “have shown some signs of picking up.” it said in a statement, while consumer demand at home remains “resilient.”
Shirakawa, who spent more than three decades at the BOJ before leaving in 2006 to become a professor, took up the governor job in April 2008, just months before the collapse of Wall Street titan Lehman Brothers which heralded the start of the global financial crisis.
An expert on monetary policy with no government background, Shirakawa was considered the brain behind the BOJ’s unorthodox use of aggressive easing which until 2006 had flooded the banking system with virtually free money after zero interest rates alone failed to tackle persistent deflation.
