Who Will Be The Next Head Of The Bank Of Japan?

Tyler Durden's picture


In a surprise announcement, BoJ Governor Shirakawa announced that he will step down on 3/19 (a month ahead of schedule) and while Barclays notes that there had been talk at one point that Mr Shirakawa might step down in a bid to protect the BoJ’s independence in response to Mr Abe’s threats to revise the BoJ Act; the decision, however, appears to have been motivated by policy considerations (the desire to have the governor and deputies start together). At a time when Japan’s stockmarkets are celebrating JPY weakness, Mr Shirakawa’s move provided yet more bounce as the new BoJ leader is expected to be even more dovish. Abe's push for a new governor, however, is meeting resistance from his own cabinet and financial bureaucrats, who fear extreme measures from the central bank may trigger a damaging rise in bond yields. The tussle, which Reuters notes, is testing Abe's resolve, but lies between a slightly less dovish bureaucrat in Toshiro Muto (favored by the opposition) and a banker, Haruhiko Kuroda, who is a front-runner in Abe's camp. With Draghi's comments today, we suspect Abe will err on the side of uber-dovish to fight the currency wars alongside him.


The four front-runners:


The Economist notes,

Mr Shirakawa’s decision, which caught even his BoJ colleagues by surprise, enables Mr Abe to appoint a new governor on the same day as two deputy governors. BoJ-watchers say there are three names prominently in the frame to replace him, all of whom share Mr Abe’s belief in bold monetary easing.


Mr Iwata, 66, is widely considered the most dovish of the [four]; he supports big purchases of Japanese and foreign bonds to cheapen the yen and bolster the economy.


According to a recent poll in the Nikkei, Mr Muto, 69, is the favourite among Japanese market participants (though an earlier nomination was blocked by a hostile upper house of parliament in 2008, when Mr Shirakawa got the job) - though he appears to be the least dovish (of an admittedly uber-dovish group)

However, as Reuters reportsMuto may not satisy Abe's dovishness and desire for a non-bureaucrat,

"Abe will have the final word." It is virtually a given that whoever takes over in coming weeks as head of the Bank of Japan will pursue monetary easing with more vigor than outgoing governor Masaaki Shirakawa.




At stake is how far the new BOJ chief will be prepared to push the central bank into untested policy waters in answer Abe's call for an all-out assault to break Japan out of years of grinding deflation and its fourth recession since 2000.


It is up to Abe and his cabinet to put forward a candidate to replace Shirakawa and his two deputies on the nine person board. That is expected by the end of this month.


Abe is keen to maintain the momentum behind his economic prescription - dubbed "Abenomics" - and appointing an outsider with unorthodox ideas could accomplish that.


"Abe has said he wants someone who can drive the BOJ into taking unprecedented policy steps. It wouldn't make sense for him to choose an ex-bureaucrat,"

And so Barclays believes that Kuroda is more likely:

We believe Haruhiko Kuroda is the most likely candidate to become the next governor as he meets the three conditions set forth by Finance Minister Aso in January and reiterated today (5 February):


1) organizational management experience;


2) competent (English) language skills; and


3) good health to meet the tough demands of the job.


The first condition suggests the new governor will not be an academic, while the third tends to eliminate elderly candidates. However, we do believe an economist (perhaps Takatoshi Ito or Kazumasa Iwata) could fill one of the two deputy positions.


If Mr Kuroda becomes the new governor, we believe the possibility of additional monetary easing will strengthen. Given his views outlined in the table below, we believe likely moves could include:


1) an expansion of JGB purchases in 2013 under the Asset Purchase Program (APP) with an extension in the residual maturity to 1-5y from the current 1-3y;


2) an increase in the target for buying risk assets, especially corporate bonds; and


3) an expansion in the amount of JGBs purchased in 2014 under the open-ended method, which was newly introduced on 22 January together with the 2% price stability target.


In our view, the possibility of foreign bond buying remains relatively low. But if such operations were introduced, we believe it would take the form of regular monthly purchases of a fixed amount in order to downplay any interventionist overtones.

Prime Minister Abe will nominate a new governor around the 15th of this month, according to the Nikkei newspaper. The appointments of the governor and his deputies must be approved by both the Upper and Lower Houses of the Diet. The ruling parties hold a majority in the latter, but not the former.

As Reuters concludes,

To get his candidates approved in the upper house, Abe needs votes of the opposition Democratic Party of Japan or, failing that, a combination of votes from smaller parties.


The divergence of views among the parties limits chances of dark horses like Kikuo Iwata and Ito winning the nomination, though they could land the deputy governor posts, analysts say.


"I don't think dark horse candidates will get approved by parliament. I think the government will play it safe this time and try not to disrupt markets,"

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Thu, 02/07/2013 - 15:43 | 3223852 JeremyWS
JeremyWS's picture

No-one from goldman?

Thu, 02/07/2013 - 15:49 | 3223870 TruthInSunshine
TruthInSunshine's picture

And all these denials by Japan, the ECB and by the U.S. Treasury Secretaries, about how "we aren't intentionally devaluing our fiat currency" (Draghi today -- Currency war follows financial crisis--, Taro Aso of Japan yesterday)....don't be too surprised to find another Plaza Accord type event happening soon.

Aso Says Only Germany Criticizing Japan On Currency
  • By Dow Jones Business News,  February 06, 2013, 10:35:00 PM EDT

TOKYO-- Japan's finance minister suggested Thursday that he believes the recently weakening yen won't be a major topic at the coming G-20 finance ministers' meeting in Moscow.

"It's only Germany who's criticizing Japan over the recent yen moves," Taro Aso said during a parliamentary session.

The remark suggests Mr. Aso believes Germany's complaints that Japan is artificially pushing the yen down are not widely shared among other nations, and that the G-20 finance ministers will not likely spend much time discussing the matter.

The finance ministers of the Group of 20 leading economies will meet on Feb. 15 and 16.

Mr. Aso also reiterated that recent yen moves are the result of Japan's efforts to defeat deflation.

"It's very clear that we are not aiming to push our currency down," he said.

Thu, 02/07/2013 - 15:51 | 3223884 kaiserhoff
kaiserhoff's picture

extreme measures from the central bank may trigger a damaging rise in bond yields

as in, any rise would be fatal, but why worry, be happy.  No problems mon....

Thu, 02/07/2013 - 15:54 | 3223896 TruthInSunshine
TruthInSunshine's picture

Yes, if we haven't seen "extreme measures" by the central fiat fractional "bank(s)" thus far, I can hardly wait.

Thu, 02/07/2013 - 16:03 | 3223904 redpill
redpill's picture

we need moal STIMURUS!!!

Thu, 02/07/2013 - 16:13 | 3223918 kaiserhoff
kaiserhoff's picture

I thought Viagra was a blue pill...

Thu, 02/07/2013 - 16:15 | 3223948 TruthInSunshine
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 Stimurus-San: Courtesy of United Parcel Service Geisha

*Disclaimer: Not official uniform of UPS

Thu, 02/07/2013 - 16:16 | 3223954 ParkAveFlasher
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Me rikey!

Thu, 02/07/2013 - 16:16 | 3223956 NotApplicable
NotApplicable's picture

"Who Will Be The Next Head Of The Bank Of Japan?"

Your mom?

Thu, 02/07/2013 - 16:20 | 3223969 kaiserhoff
kaiserhoff's picture

Dat's yo Momma.

Must BE PC.

Thu, 02/07/2013 - 16:22 | 3223978 NotApplicable
NotApplicable's picture

You've met her, I see.

Tell ya what, despite it all, she got game!

Thu, 02/07/2013 - 19:04 | 3224451 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

After the crisis finally starts in Japan, remember they've got one little trillion USDs... I wonder where that cash will flow.

Thu, 02/07/2013 - 15:55 | 3223899 Shameful
Shameful's picture

Ah but if the central bank is willing to pick up 100% of the outstanding debt and all issuances can peg rates wherever they want.  Sure there is hyperinflation, but that seems to be a policy tool now.

Thu, 02/07/2013 - 16:26 | 3223995 NotApplicable
NotApplicable's picture

A.K.A. "likely moves." As if he has any choice. Reminds me of what I learned in the USMC.

Yours is not to wonder why.

Yours is but to print and buy.

Thu, 02/07/2013 - 17:13 | 3224169 suteibu
suteibu's picture

A reverse Plaza Accord?  If only Germany and Italy weren't tied down by the Euro it might get some support outside of the good old US of A.

Thu, 02/07/2013 - 15:44 | 3223857 docmac324
docmac324's picture

Hu Flung Pu, no wait he's Chinese.


Thu, 02/07/2013 - 15:45 | 3223868 redpill
redpill's picture

maybe Kumfrum Sum Yung Gai?

Thu, 02/07/2013 - 15:48 | 3223876 Shameful
Shameful's picture

I'm holding out hope for hte wild card entry, Alan Greenspan.  Sure bit of demotion from Fed Chair, but no one can doubt the Maestro's ability to kne cap a currency.  Or there is always Gideon Gono, get that Yen to worthless in a flash.

Thu, 02/07/2013 - 15:50 | 3223880 Vlad Tepid
Vlad Tepid's picture

If the next guy's not a goldbug and actively learning lessons from China, he might as well resign before he takes the post because his tenure will just end in more shit stains on the tapestry of Japanese history.

Thu, 02/07/2013 - 16:22 | 3223972 NotApplicable
NotApplicable's picture

Learners are waaaay over-qualified for the position. Sorry, try again.

Thu, 02/07/2013 - 15:52 | 3223887 zebra
zebra's picture

I nominate Epson CEO, who has the right experience and the right tool, and the printing quality is superior, too.

Thu, 02/07/2013 - 15:55 | 3223890 Dr. Engali
Dr. Engali's picture

My guess is that whoever they are ,they will have ties to a certain squid.

Thu, 02/07/2013 - 15:53 | 3223892 oddjob
oddjob's picture

I was hoping for Benjamin Fulford.

Thu, 02/07/2013 - 16:18 | 3223960 NotApplicable
NotApplicable's picture

LOL (Fulford comedy FTMFW!)

I was just wondering, well, what does David Rockefeller think about this?

Thu, 02/07/2013 - 20:24 | 3224630 BigInJapan
BigInJapan's picture

Certainnly no less batshit crazy than the others in the diet.


"Hey Benjamin, you've got something on your neck"

"You see thaaaaat's the residue form the space alien parasite that the Chinese Jew mafia implanted in my neck so they can control my actions. Thanks to my guardian ninja army in Japan, however, I now have a remote control for it and have trained the parasite to weave the most amazing tapestries. . . Wait. Are you asleep right now?


Thu, 02/07/2013 - 15:56 | 3223897 medium giraffe
medium giraffe's picture

Bring me another!


Thu, 02/07/2013 - 16:01 | 3223907 DaveyJones
DaveyJones's picture

Britney Spears. That "living in a sick illusion" experience 

Thu, 02/07/2013 - 16:00 | 3223908 williambanzai7
williambanzai7's picture

Ponzo Sodami

Thu, 02/07/2013 - 16:02 | 3223913 Orly
Orly's picture

Takehiro Sato

Thu, 02/07/2013 - 16:03 | 3223915 Pancho Villa
Pancho Villa's picture

It's a pity that Rudolf E. A. Havenstein is dead. Otherwise, he would be the obvious choice.

Thu, 02/07/2013 - 16:03 | 3223917 disabledvet
disabledvet's picture

I really do want to just fly to Japan right now and say "hello, i'm the big, fat American guy." And after some quality "hang sang" jet on off to Italy and say...and do...the same thing...

Thu, 02/07/2013 - 16:05 | 3223921 kaiserhoff
kaiserhoff's picture

Who will head the Bank of Japan?

Well, it won't be kaiserhoff.  Praise the Lord for all small favors.

Thu, 02/07/2013 - 16:05 | 3223923 venturen
venturen's picture

GEITHNER...he is out a job and has asian experience...and he won't have to pay his taxes either! 

Thu, 02/07/2013 - 16:09 | 3223931 Bam_Man
Bam_Man's picture

Kuroda? Didn't he pitch for the Yankees last year?

Thu, 02/07/2013 - 16:20 | 3223968 NotApplicable
NotApplicable's picture

Wait... they fielded a team last year???

Thu, 02/07/2013 - 16:10 | 3223935 davidsmith
davidsmith's picture

Why don't they put in the Crown Princess--you know, the one who went nuts.  Couldn't be worse!

Thu, 02/07/2013 - 16:27 | 3223996 Motorhead
Motorhead's picture

If the Japanese don't behave, it may be someone from Russia or China.

Thu, 02/07/2013 - 16:28 | 3223999 yogibear
yogibear's picture

It doesn't matter. Japan is dying financially. Want to see the future of the US? Look at Japan.

Attempting to print out the problem results in Japan.

Bubble Bernanke and the Fed embarked on the Japanese path when they saved everything that should have failed. 

Rather then cleansing the debt and corruption Bernanke, the Fed and the government did everything to hide and prop up the scum, just like Japan.


Thu, 02/07/2013 - 20:10 | 3224602 BigInJapan
BigInJapan's picture

Isn't that cocksucker Koichi Hamada in the running?

Thu, 02/07/2013 - 20:13 | 3224607 Yen Cross
Yen Cross's picture

 Does it wrearie matter? The rapanese puberment is rike musical chairs. Rat rasshole Abe rill have his ray.

Thu, 02/07/2013 - 20:25 | 3224634 BigInJapan
BigInJapan's picture

HAHA! That's the worst R/L gag ever! Yen Cross, you da man for not even trying!

Make that money, son!

Thu, 02/07/2013 - 20:31 | 3224649 Yen Cross
Yen Cross's picture

 I trade it, you speak it. Good luck selling that house/flat you mentioned the other day.

Thanks for the (son) complement. I like you even more now. :D

Thu, 02/07/2013 - 21:13 | 3224747 besnook
besnook's picture

they will deploy the quadrillion yen coin before they let any foreigner buy jgbs.

Thu, 02/07/2013 - 21:59 | 3224843 Yen Cross
Yen Cross's picture

  Press release; Next BoJ head.   Ubend Meover ), apparantly Abe has a deep appreciation for " Ubend Meovers" M/E energy contacts.

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