Prime Minister Shinzo Abe's praise for Haruhiko Kuroda suggests he was considering reappointing him early in the selection process for a Bank of Japan governor. Abe previously said, "I have trust in Mr. Kuroda's abilities."
On the night of Jan. 11, Abe invited Deputy Prime Minister Taro Aso, who also is the finance minister, to his home in the Tomigaya area of Tokyo, where they discussed retaining Kuroda.
A source close to the ministers said Abe and Aso had already "shared the view" that Kuroda would stay in the post.
There is a prevalent view within the government that the robust economic conditions that have boosted the administration could not have been realized without the central bank's massive monetary easing, led by Kuroda.
Market players have also acted under the assumption that Kuroda would be reappointed. A senior government official said there were concerns that "the economy would be affected if [Kuroda] was replaced and a new governor who acted contrary to market expectations was installed."
According to an aide to the prime minister, Abe said, "Consumer sentiment needs to become more positive. This is not the time for changing policy."
To achieve the goal of exiting deflation, a situation in which replacing Kuroda could be interpreted as a change of course in the Abenomics economic policy package must be avoided as much as possible.
A slowdown in the domestic economy would directly lead to a fall in the Cabinet's approval rating.
Regarding Abe's aim for a sweeping win in the ruling Liberal Democratic Party's presidential election in September as he looks to achieve his long-held desire to amend the Constitution, a source in the Prime Minister's Office said, "Actually, there was no other choice but to retain Kuroda in the post."
Japanese Ambassador to Switzerland Etsuro Honda, who is also one of the brains behind Abe's economic policy, was named as a potential candidate for a deputy governor role at the central bank. But a senior LDP member said appointing Honda could have been seen as "preferential treatment for [Abe's] personal friends." For this reason, it was decided Honda would not be put forward for a deputy governor role.
Finance Minister Aso is also believed to have been reluctant to appoint Honda, who previously proposed postponing raising the consumption tax rate.
Criticism is expected to mount against Kuroda, who is yet to achieve the 2 percent inflation target.
On Friday, Akira Nagatsuma, the acting leader of the opposition Constitutional Democratic Party of Japan, opposed Kuroda's reappointment, saying, "Kuroda must not be reappointed without an examination of his methods."
The opposition parties intend to question the policies of the government and the central bank in Diet deliberations.
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