Japan PM Abe aide Honda says inappropriate to reappoint BOJ governor Kuroda

By Tetsushi Kajimoto and Yoshifumi Takemoto

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda should not be reappointed when his term ends next April, as the central bank needs a new leader to achieve its inflation goal of 2 percent, a contender for the job, and close aide to Prime Minister Shinzo Abe, said.

Etsuro Honda, Japan’s ambassador to Switzerland, is seen as a potential candidate to succeed BOJ Governor Haruhiko Kuroda when his five-year term ends in April next year.

Honda’s remarks on Wednesday came after Abe’s election victory last month raised expectations for Kuroda to be reappointed, or an advocate of reflationary policy, such as Honda, to be picked instead.

Kuroda has launched an unprecedented burst of monetary stimulus since Abe handpicked him a few months after he swept to power in December 2012, pledging to end deflation. But more than four years of monetary stimulus has failed to spur inflation.

“(The BOJ) needs a change of heart by rebuilding the regime. To do so, it needs a new leadership,” Honda told Reuters in an interview.

If he was asked to assume the top post at the central bank, Honda said he would be willing to accept.

“If I was appointed, I will do the utmost and stake my life to defeat deflation.”

Abe said last week he had full confidence in Kuroda’s ability as central bank governor, but added that nothing had been decided.

Kuroda’s reappointment would mean his signature stimulus program will stay for the time being even as U.S. and European central banks head towards normalizing unconventional monetary policy.

Honda said the BOJ should commit itself to achieving Abe’s aim of expanding nominal gross domestic product to 600 trillion yen ($5.28 trillion) by reviewing a joint statement it issued with the government in 2013.

“If the situation is left as it is now, a 2 percent inflation probably cannot be achieved,” he said.

“We need to adopt stronger policy steps to hit 2 percent inflation, by all means, in the not so distant future,” he added, calling for further fiscal spending backed by BOJ purchases of government debt.

($1=113.6100 yen)

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