Masaaki Shirakawa, the acting head of the Bank of Japan will be announced as the new governor of the central bank. The politics of picking the governor has left uncertainty about what will happen to Japanese monetary policy, but the pick of Shirakawa, a long-time bank veteran is said the be in lock step with the previous governor.
So what can we expect? One simple way is to look at his writing. We get a good view of Bernanke from his academic work, but Shirakawa has not been a prolific writer. There is one BIS piece on monetary policy with a number of authors, “Japan’s deflation, problems in the financial system and monetary policy” Naohiko Baba, Shinichi Nishioka, Nobuyuki Oda, Masaaki Shirakawa, Kazuo Ueda and Hiroshi Ugai of the Bank of Japan. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=861664].
This paper is a reflection on the current state of thinking of central bank action during the zero interest rate policy (ZIRP) and the quantitative easing policy (QEP). This work is interesting reading because it places the focus on asset price deflation not general price declines as the leading problem in Japan during the “Lost Decade”.
Understanding what the BOJ Governor may do is relevant because with Japanese growth declining there is more likely to be a change in policy. Some analysts are currently expecting a cut in rates as early as next month. The good news is that it is unlikely that we will get any change in central bank strategy, so there will be limited policy uncertainty. It also means that we are unlikely to get a strong central bank voice.
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