March 18, 2013 / 4:10 AM / 7 years ago

Mastermind of QE reappointed at Bank of Japan, suggests more change

TOKYO (Reuters) - The Bank of Japan on Monday reappointed Masayoshi Amamiya, a mastermind of quantitative easing, to oversee a key division charged with drafting monetary policy, a sign it is gearing up for a radical shift in its policy framework under a new leadership that takes over this week.

People enter the Bank of Japan headquarters in Tokyo March 14, 2013. REUTERS/Toru Hanai

The expected new BOJ governor, Haruhiko Kuroda, has pledged to do whatever it takes to achieve the central bank’s new 2 percent inflation target focusing on expanding its balance sheet with purchases of longer-dated government bonds.

The reappointment of Amamiya, a 57-year-old career central banker admired for his skills in coming up with creative banking ideas, may heighten the chance the central bank will shift its policy closer to the quantitative easing campaign of the last decade.

“Amamiya is the architect of many of the BOJ’s existing policy frameworks. His return now may be to review them and prepare for an overhaul in time for the BOJ’s next rate review in April,” said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo.

As one of the BOJ’s six executive directors, Amamiya had overseen the powerful Monetary Affairs Department until May last year when he was sent to the bank’s branch in Osaka, western Japan.

He was reappointed on Monday to oversee the department again, taking over the assignment from 55-year-old Kazuo Momma.

Amamiya has played a key role in crafting many of the BOJ’s policies, including the quantitative easing of pumping excess cash to markets via bond purchases that lasted until 2006. He was also deeply involved in the creation of the BOJ’s current monetary easing tool, its asset-buying programme, in 2010 and its surprise monetary easing in February last year.

His deep contacts with finance ministry bureaucrats and skills in communicating with lawmakers will also help smooth policymaking for the new BOJ leadership, analysts say.

The BOJ is expected to ease policy most likely through increases in purchases of longer-dated government bonds, and debate an overhaul of its framework at its next policy meeting on April 3-4, sources familiar with its thinking say.

Kuroda’s pledge to “act with speed” to achieve the BOJ’s 2 percent inflation target has heightened speculation he may summon a meeting even before the April rate review. It is uncertain whether he will indeed call one, but BOJ officials are preparing for the possibility just in case, sources have told Reuters.

While the BOJ’s nine-member board has the final say in monetary policy decisions, the Monetary Affairs Department plays a key role in the process by hammering out policy options.

Editing by Kim Coghill

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