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Bank of Japan Needs a Fresh Eye

By William Pesek
January 18, 2013 9:25 AM EST

As Prime Minister Shinzo Abe searches for a new Bank of Japan governor, he should look outside an institution that has little credibility in global circles.

Officialdom in Tokyo worries Japan's new prime minister will settle on a BOJ bureaucrat to succeed Masaaki Shirakawa when his term ends in April. Doing so would be meant to maintain the appearance of continuity while Abe taps a more compliant policy maker -- someone who will go further to grow the BOJ's balance sheet. That would be a mistake.

Abe would do better by going with a respected economist with finance experience who is more open-minded and less doctrinaire than the University of Chicago-trained Shirakawa. One name making the rounds is Haruhiko Kuroda, a former Ministry of Finance official, who would be a fine choice.

Since 2005, Kuroda has been running the Asian Development Bank in Manila. During that time, he raised the international profile of an organization charged with reducing poverty in a region that's home to a critical mass of the world's extreme poor. That experience, fused together with his time as a MOF vice minister, mean Kuroda would bring some keen and timely insights to Tokyo.

The whole game for the BOJ, as it tries to defeat deflation, is traction. Its policies have gotten little to date, and the next central-bank head must think outside the box and with a level of creativity that currently eludes Tokyo. A man who's spent the last seven-plus years searching for new and innovative solutions to broaden economic growth could be just what the BOJ needs. Kuroda also would bring a mix of gravitas and strong government connections to the job.

The central bank of the third-biggest economy desperately needs a fresh eye. Japan may find it in Manila.

(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)


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