Kuroda’s next five years: Prepare to ease again

Summary

It is almost official. The Japanese government leaked their intention to re-appoint the BoJ governor Haruhiko Kuroda when his current term expires on April 8. What are the key challenges for him in the next five years? On the upside, Mr. Kuroda may need to engineer an exit from the current stimulative monetary policy. On the downside, there is the seemingly impossible task of how to devise additional stimulus if the Japanese economy faces a downturn under his watch. In our view, the latter is the ultimate challenge for Mr. Kuroda. While the current economic expansion may last for a few years, it is likely that a recession hits Japan and force the BoJ to devise an imaginative way, something beyond even beyond the current unconventional monetary policy, to save Japan from falling back to deflation again.

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