February 24, 2015 / 7:36 AM / 4 years ago

Japan lower house approves reflationist Harada for BOJ board

TOKYO (Reuters) - The lower house of parliament gave approval on Tuesday for an advocate of aggressive monetary easing to join the Bank of Japan’s divided policy board, in a move regarded as supportive of Governor Haruhiko Kuroda’s push for radical stimulus.

A man walks past the Bank of Japan building on a rainy day in Tokyo, February 18, 2015. REUTERS/Thomas Peter

Yutaka Harada, a 64-year-old Waseda University professor, will replace Ryuzo Miyao, also an academic, whose five-year term ends on March 25.

The government nominee is expected to receive the assent of the upper house on Wednesday. The ruling coalition holds a solid majority in both chambers.

Opposition parties voted against the nomination, arguing that radical monetary stimulus could cause excessive weakening in the yen, which would drive up import costs for resource-poor Japan and hurt households’ purchasing power.

Miyao swung the board narrowly in favour of October’s surprise monetary easing that was decided by a 5-4 vote. The close vote has given greater significance to the board’s composition, as it suggested the difficulty Kuroda might face should he want to ease further.

Harada, who wrote a book with BOJ deputy governor Kikuo Iwata on how bold monetary easing can beat deflation, may give Kuroda a stronger grip on the divided board, analysts say.

However, Harada told Reuters in January that the BOJ does not necessarily need to persist with its 2 percent inflation target, a view that may complicate debate within the board.

The focus of monetary policy should be on stimulating the economy rather than achieving an inflation target, which should be considered only as a means for reflating growth, Harada said.

“I think it’s okay even if the BOJ doesn’t achieve 2 percent inflation in fiscal 2015. It’s important, instead, to guide policy so that the economy can continue to grow around 2 percent.”

For now, Harada’s appointment is unlikely to trigger an immediate shift in policy.

Last week Kuroda said that he saw no current need to expand monetary stimulus, but that the bank would determinedly ease policy further if his inflation plans were disrupted by risks.

Editing by Eric Meijer and Simon Cameron-Moore

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