Next BOJ Governor Faces a 'Job From Hell,' Kuroda Critic Says

(Bloomberg) -- The next governor of the Bank of Japan faces a "job from hell."

That’s according to Takeshi Fujimaki, a banker-turned-lawmaker who sees any attempt by Japan’s central bank to exit its program of unprecedented easing as triggering a Greek-like debt crisis.

"This is the calm before the battle," Fujimaki, an opposition Japan Innovation Party politician who once served briefly as an adviser to George Soros, said in an interview at his Tokyo office on Monday.

BOJ Governor Haruhiko Kuroda’s five-year term runs out in April, with recent praise from Prime Minister Shinzo Abe strengthening expectations that the 73-year-old will stay on for a second stint. His massive easing program has weakened the yen, bolstered exports and helped stock prices to more than double. But inflation is still short of the government’s 2 percent target, and critics say the BOJ’s swollen balance sheet is unsustainable.

Kuroda leads the guessing game for who will run the BOJ

Fujimaki, 67, said he agreed with the view expressed by Kuroda’s predecessor Masaaki Shirakawa in his 2013 resignation press conference, when he said no judgment could be made on non-traditional monetary easing in Japan and in other developed economies until exits had been completed.

Last week, Kuroda said the BOJ can take the appropriate steps to exit when the time comes, but talking specifics of an exit now would end up confusing markets.

Carrying On

Even so, Fujimaki said Kuroda should stay on to oversee an exit from the policies he introduced.

"Because Mr. Kuroda has taken it this far, he should carry on until the end," Fujimaki said. "Just taking the good part and running away would be unfair."

Fujimaki also warned against installing former Abe adviser Etsuro Honda into the position. Honda, a proponent of even more drastic monetary easing, would further swell the BOJ’s balance sheet -- currently almost the size of Japan’s economy -- eventually causing worse economic damage.

The lawmaker gave Abe’s economic policies -- the "three arrows" of monetary easing, flexible fiscal policy and structural reforms -- a fail grade of between 10 percent and 20 percent.

"The monetary policy is a mistake," he said. "What should really have been done is the deregulation part, and not in tiny steps, but in a more drastic way."

©2017 Bloomberg L.P.