New Bank of Japan governor to be named soon

Prime Minister Shinzo Abe wants a bold policy leader to lead the central bank.

Abe also expects the new governor to end deflation and drive a recovery from recession. The new man will replace Masaaki Shirakawa, whose term ends in April.

“We want someone who can push through bold monetary policy,” he said. “We are thinking hard about fiscal discipline as we form the next fiscal year’s budget. Still, the economy isn’t going to change unless we display a firm commitment to escape deflation at the same time.”

The choice of a successor will be made after consultations with Yale Professor Emeritus Koichi Hamada and others, Abe said.

Abe last week announced a US$115 billion spending package that includes money to stimulate private investment to boost the economy. Abe’s extra spending could help deliver a real annualized GDP growth of 3.5% in the second quarter of this year,

The spending will include US$35 billion for revitalizing local economies, medical services, child care and other measures, the government said. Measures to stimulate private investment will include steps to promote clean energy and energy saving.

The government and central bank need to agree on implementing a 2% inflation target to end deflation.

Deflation has meant that consumer prices (excluding fresh food), a benchmark monitored by the central bank, haven’t advanced 2% for any year since 1997. Prices fell 0.1% in November, compared with a year earlier.

Japan’s gross domestic product shrank at an annualized 3.5% pace in the third quarter after contracting in the three months ended June, meaning Japan is in a recession..