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Japan's PM Discusses Central Bank Role After New Governor Appointment

Japanese Prime Minister Fumio Kishida has stated that the government and the central bank must examine their relationship in shaping economic policy after the appointment of a new Bank of Japan (BOJ) governor in April.

Fumio Kishida
Fumio Kishida

This comment increases the likelihood that the government will alter its decade-long agreement with the central bank, which concentrates on combating deflation. When asked about the type of person he would select as BOJ governor, Kishida stated that it would be someone "best suited for the job" when Haruhiko Kuroda's term ends in April. Kishida has the power to select the central bank head.

BOJ's Ultra-Loose Policy Under Scrutiny

Last month, the BOJ surprised markets by expanding the range around its 10-year bond yield target in order to address market distortions caused by its policy, a move that investors viewed as a precursor to a future interest rate hike. There is currently widespread speculation that the BOJ may move further to phase out Kuroda's massive stimulus by adjusting its yield control policy under a new central bank governor. The BOJ's ultra-loose policy has been criticized for undermining bank margins, distorting bond market pricing, and contributing to a yen decline that has increased import costs.