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Economy

Japan taps reflationist for BOJ board with eye on post-COVID recovery

Pick buffers against drastic shift from accommodative stance

The Bank of Japan has maintained a robust monetary easing policy to prop up the economy during the newest wave of coronavirus infections. (Photo by Mizuho Hasegawa)

TOKYO -- The Japanese government on Thursday nominated reflationist economist Asahi Noguchi to join the Bank of Japan's policy-setting board, a move that reinforces support for the central bank's ultra-accommodative stance in combating the economic fallout from the pandemic.

Noguchi will replace Makoto Sakurai, whose term ends March 31. After he is confirmed by the Diet, Noguchi will be the fourth reflationist on the nine-member board.

The central bank has maintained a robust monetary easing policy to prop up the economy during the newest wave of coronavirus infections. Noguchi's appointment is not expected to bring about an immediate change to the agenda.

When the economy moves toward a full recovery after the outbreak dies down, discussion will likely ensue over shifting BOJ policy toward normalization.

"The seating of a reflationist focused on the economy is presumably to insure against putting monetary tightening on the table," BNP Paribas economist Ryutaro Kono said.

Asahi Noguchi is slated to be the newest reflationist on the Bank of Japan's policy board.

After receiving his doctorate from the University of Tokyo, Noguchi was hired as a lecturer at Tokyo's Senshu University in 1988. He has been a full professor there since 1997, specializing in the international economy and economic policy.

Noguchi has co-authored works with Yale University professor emeritus Koichi Hamada -- who advised then-Prime Minister Shinzo Abe on economic policy -- along with onetime BOJ Deputy Gov. Kikuo Iwata.

"This means that Abenomics will likely remain in force," said Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute.

Reflationists advocate forceful monetary easing and fiscal spending to spark inflation. In his book "How Abenomics Changed the Japanese Economy," Noguchi warned against untimely austerity measures.

"The hasty shift to a macroeconomic retrenchment policy was the substantial cause for Japan experiencing a prolonged deflationary slump," he argued.

If policymakers seek an exit strategy, "it is better to do it after confirming that wages and prices are clearly on the rise; then there would be no problem," Noguchi wrote.

As prime minister, Abe brought in Hamada and Etsuro Honda as advisers to help craft his Abenomics policy. His government tapped a series of reflationists to sit on the BOJ's policy board.

Noguchi's nomination shows that current Prime Minister Yoshihide Suga's government is maintaining that trajectory. Other reflationists on the BOJ board include Deputy Gov. Masazumi Wakatabe, along with board members Goshi Kataoka and Seiji Adachi.

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