Bank of Japan board reshuffle brings in less dovish members
A man wearing a protective mask walks past the headquarters of the Bank of Japan amid the COVID-19 outbreak in Tokyo, Japan, May 22, 2020. (Reuters Photo)


The Bank of Japan's two new policymakers said Monday the central bank needs an exit strategy from its massive stimulus, a sign the board's balance could tilt in favor of a withdrawal of Governor Haruhiko Kuroda's radical monetary easing.

Hajime Takata, a former private economist, said the BOJ must "always think about" an exit strategy even though now may not be the timing for an actual end to ultra-low interest rates.

The other newcomer, Naoki Tamura, who joined from a commercial bank, said an exit from the easing policy would become a focus of discussion once wages begin to rise in tandem with inflation.

"Only when the BOJ can normalize monetary policy and exit can it describe its massive monetary easing program as a success," Tamura said in an inaugural news conference.

Takata and Tamura joined the BOJ's nine-member board on Sunday, replacing former economist Goushi Kataoka, a vocal advocate of aggressive monetary easing, and banker Hitoshi Suzuki. Their five-year term had expired.

The arrival of Takata and Tamura, who both showed no reluctance to speak about an exit from easy policy, could shift the board's debate less in favor of maintaining massive stimulus.

Deputy Governor Masazumi Wakatabe, another vocal dove, will reach the end of his five-year term in March next year. That will be followed by the departure of Governor Haruhiko Kuroda, opening up the possibility of a shift away from the current dovish policy bias.

Takata, a bond market expert, had been considered by markets to be more open to dialing back Kuroda's prolonged and massive stimulus program, which has been hailed for reviving growth but criticized for causing market distortions.

He once wrote in a research note that the BOJ could come under pressure to consider exiting its ultra-loose policy if the European Central Bank (ECB) follows in the footsteps of the U.S. Federal Reserve in withdrawing monetary stimulus.

That view contrasted with his predecessor Kataoka, who consistently proposed ramping up stimulus by strengthening the BOJ's commitment to ultra-low rates.

The ECB last week hiked rates for the first time in 11 years, joining a wave of central banks tightening monetary policy to combat surging inflation. That left the BOJ among the few remaining central banks keeping its money tap wide open. Kuroda last week reiterated his resolve to keep interest rates ultra-low, after the BOJ's widely expected decision to maintain an extremely loose monetary policy.