Japan Nominates Reflationist, Banker, to Replace BOJ Dissenters

  • Banker Hitoshi Suzuki, economist Goshi Kataoka to join board
  • Takahide Kiuchi, Takehiro Sato leave in July when terms end

Japan’s parliament nominated banker Hitoshi Suzuki and economist Goshi Kataoka to the Bank of Japan board to replace two members who have frequently dissented against the policy direction set by Governor Haruhiko Kuroda.

Hitoshi Suzuki

Source: Bank of Tokyo Mitsubishi UFJ

Suzuki, 63, an audit-board member of Bank of Tokyo-Mitsubishi UFJ Ltd., and Kataoka, 44, of Mitsubishi UFJ Research and Consulting Co., will replace Takahide Kiuchi and Takehiro Sato, whose terms end on July 23.

Kataoka is viewed as a reflationist who ought to bolster support for Kuroda’s aggressive stimulus while Suzuki brings experience in commercial banking and financial markets in Japan and abroad. Although the board has comfortably passed Kuroda’s policies 7-2 in meetings for more than a year, it was split 5-4 on the decision to introduce negative interest rates in January 2016.

Goshi Kataoka

Source: Mitsubishi UFJ Research and Consulting

"The nominations show Prime Minister Shinzo Abe wants the BOJ to continue the current reflationary stimulus program," said Yasuhiro Takahashi, an economist at Nomura Securities Co. "Abe is also aware that he shouldn’t push the gas pedal too much as the BOJ’s negative-rate policy last year caused public concern."

Reflationist Stance

Kataoka’s views are close to Deputy Governor Kikuo Iwata and fellow board member Yutaka Harada,  said Mari Iwashita, chief market economist at SMBC Friend Securities Co., adding that he may have a focus on the quantity of purchases by the central bank. "There’s no doubt that he’s a reflationist," she said.

In a research paper last year titled "A Reboot of Reflationary Policy Is Wanted," Kataoka advocated for greater fiscal spending and a freeze on plans to increase Japan’s sales tax in 2019.

Read more on Kataoka’s Research and his comments to Bloomberg.

Suzuki’s banking experience could make him more sympathetic to the industry’s struggle with negative rates.

"It’s good that a person who’s from the banking industry has been chosen given the negative-rate policy," said Iwashita. "It’s good that someone with expertise for a move toward an exit from the negative rate policy has been selected.”

Kuroda’s Tenure

The BOJ board is set for further change early next year, with the terms of the two deputy governors due to expire in March and Kuroda’s tenure ending in April.

Some analysts see a chance that the government will break from tradition and reappoint Kuroda, given his good relationship with Abe and the pivotal role the central bank has played in the prime minister’s economic program.

With Japan far from its 2 percent inflation target and the economic outlook fragile, the likelihood is the BOJ will need to continue significant stimulus for the foreseeable future. Yet tapering is on the agenda for other major central banks and investors have challenged Kuroda’s view that there is still ample room for ongoing purchases of government bonds and other securities.

Taper Debate

Kataoka would stand up against any premature talk of exit from stimulus or a rate hike, said Yuji Shimanaka, an economist at Mitsubishi UFJ Morgan Stanley who has known him for two decades. Meanwhile, Suzuki is a financial markets professional with a firm grasp of how the BOJ’s current yield-curve control program affects investors and commercial banks, said Shimanaka.

Click here to get Bloomberg Intelligence’s take on the board picks.

Suzuki studied economics at Tokyo’s Keio University and joined Mitsubishi Bank in 1977, according to government documents obtained by Bloomberg.

He has an MBA from the Stern School of Business at New York University in 1984 and was deputy president of the London office of Tokyo Mitsubishi International for some time from 1998, the documents show.

Suzuki has held various other positions in the bank and was on the audit board from 2016.

Economic Theory

Kataoka finished the requirements for a Ph.D from Keio University and specializes in macro-economy, economic theory and the practical application of economics, according to his biography page on the Mitsubishi UFJ Research and Consulting website. It also says he’s a member of the Keynes Society. 

Their appointments require approval by both houses of parliament, where the ruling coalition has control.

There will be no change in the board for the next three policy meetings. The next gathering of the nine-member board is April 26-27.

Spokespeople for Mitsubishi UFJ Research and Consulting and for Bank of Tokyo-Mitsubishi UFJ declined to comment on the nominations.

— With assistance by Takahiko Hyuga

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