The WSJ reports,"a year ago, Bank of Japan Gov. Haruhiko Kuroda and his predecessor, Masaaki Shirakawa, seemed far apart in their prescriptions for stopping deflation and reviving the economy. Now they look a lot closer.
In a fresh development, Mr. Kuroda has started shedding light on the need for structural changes in Japan, saying recent positive signs such as surging corporate profits don’t mean policy makers can stand pat. Pointing to labor shortages and constraints on production capacity, he says Japan needs more investment and more workers–changes that he says require more than just monetary loosening".
Enhancing growth through structural change was one of Mr. Shirakawa’s mantras when he led the Bank of Japan from 2008 to 2013. This position incurred harsh criticism from politicians who argued the BOJ wasn’t doing enough to get the economy out of deflation.
Mr. Kuroda shared the politicians’ views, saying bold action by the BOJ could make a big difference. Now that Japan is enjoying a modest recovery on the back of Mr. Kuroda’s unprecedented easing program, he seems to think this is the opportune moment to pick up the Shirakawa torch.
In an interview with The Wall Street Journal, the governor suggested achieving the central bank’s 2.0% inflation target alone wouldn’t be enough to keep the economy moving. He said the government needed to implement its growth strategy quickly.
“Unless growth potential is raised in a timely manner, the inflation rate may reach the 2.0% target, but the real growth rate may be disappointing. And that is not good for the economy, not good for the society,” he said.
Mr. Kuroda said his policies were conducive to revitalizing the economy but three further changes were necessary to raise growth.
One is for the private sector to raise capital investment, since it hasn’t invested much in the past few years. It needs to invest in human capital as well, he said.
Another is that the labor force needs to be increased by raising the participation of older people and women, and by encouraging skilled foreigners to come to Japan.
Finally, he said deregulation and structural changes were needed to raise productivity.
“These three things need to happen,” he said.
One person familiar with the BOJ’s thinking said, “Although the initial monetary policy approach that Mr. Kuroda employed was different from his predecessor, their stance of emphasizing the importance of growth is similar.”
