Kuroda critic warns BOJ have little leeway over stimulus exit

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By Leika Kihara, Kentaro Sugiyama

* The role of the BOJ will be to help fiscal policy – Okina

* The BOJ will need the government’s consent to get out of easy politics

* Ending easy politics isn’t easy even after Kuroda leaves

TOKYO, July 9 (Reuters) – The Bank of Japan has little leeway on how and when to cut stimulus measures given the scale and sweeping nature of its policies, said Kunio Okina, an academic known as a vocal critic of monetary governor Haruhiko Kurodas. experience.

Missing its 2% inflation target for nearly a decade, the BOJ’s lead role shifted to supporting fiscal policy by capping the cost of financing Japan’s huge public debt. said Okina, a former BOJ official and prominent scholar who maintains close contact with incumbent policymakers.

The most important job for the BOJ going forward is to help finance Japan’s fiscal policy, as there is little that monetary policy can do to tackle another crisis, Okina said.

Given the crucial role of the BOJ in keeping the cost of financing Japan’s huge debt low, an exit from the ultra-loose politics will take years and will require the consent of governments, he said. declared.

An exit strategy may be necessary. But that’s no longer something the BOJ can independently decide, Okina told Reuters in an interview on Wednesday.

Chosen by then Prime Minister Shinzo Abe to lower inflation to 2%, Kuroda rolled out his bazooka asset purchase program in 2013, followed by a series of unorthodox monetary easing measures to support economic growth.

But the silver wall has failed to accelerate inflation, forcing the BOJ to hold on to its huge stimulus longer than expected and shift in 2016 to a policy that caps long-term interest rates around 0. %.

After years of intensive buying, the BOJ now owns half of the Japanese government bond market. It also buys risky assets such as exchange-traded funds (ETFs) with holdings reaching around 50 trillion yen ($ 454.50 billion), making it the largest holder of Japanese equities.

After venturing into such drastic steps, normalizing monetary policy will not be easy even after Kuroda’s term ends in 2023, said Okina, now a professor at Otsuma Women’s University.

The BOJ has very little leeway or jurisdiction over its next move, including when to get out of easy politics.

$ 1 = 110.0100 yen Reporting by Leika Kihara and Kentaro Sugiyama; Editing by Michael Perry

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