Governor Kuroda: The Decade’s Most Consequential Central Banker

Mar 16, 2023

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In this debut episode of Market Depth, Tokyo- based Weston Nakamura takes a deep dive look into Haruhiko Kuroda’s decade-long tenure as the Governor of the Bank of Japan, who leaves his post as the most consequential major central banker in the modern era.

Governor Kuroda was appointed (then re-appointed for a rare second term) by Prime Minister Abe in 2013, specifically to carry out radically aggressive monetary easing measures- for which Kuroda delivered upon from his very first policy meeting with QQE. A decade later, Kuroda certainly has delivered- perhaps even overdelivered on the “easing without backing down” promise by conducting the world’s largest and now increasingly controversial experiment in monetary policy easing: yield curve control.

As Kuroda now hands the keys over to a new governor, the Bank of Japan now owns more than half of the Japanese government bond market, and is capping long term yields at explicit levels by policy, battling market forces that are pushing for a higher yielding environment against a backdrop of inflation at 40 year highs. Despite a 4% CPI reading in Japan, Governor Kuroda’s only regret is that he “was unable to achieve the 2% inflation goal.”

Whether Kuroda had achieved his objectives or not is up for debate. The question is - in the process of attempting to pull Japan out of a deflationary spiral, did Governor Kuroda create a meteoric 500 trillion yen bubble in JGBs? And what happens when he is no longer there to keep the largest bubble in history inflated?

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