Japan needs a Volcker-esque figure to end this era of bottomless quantitative easing.
As Federal Reserve chairman from 1979 to 1987, Paul Volcker took the maxim that a central banker’s role is “take away the punch bowl just as the party gets going” to the extreme.It’s hard to think of a central banker who’s had a worse couple of weeks than Bank of Japan Governor Haruhiko Kuroda.
Economic chaos ensued as global markets tried to adjust to the “Volcker Shock.” But then, that’s precisely what Volcker was hired to do: curb inflation at all costs.Volcker: The Triumph of Persistence The conditions of Kuroda’s hire in 2013 couldn’t have been more different. Volcker took the maxim that a central banker’s role is “take away the punch bowl just as the party gets going” to the extreme. Kuroda was brought in to open the monetary spigot and fill any punchbowl he could find. And fill he did, early and often, becoming very popular in Japan Inc. circles.
Now, as Kuroda prepares to pass the liquidity tap to a new BOJ mixologist, markets have no idea what to expect. Prime MinisterKishida, though, already seems to be setting the stage for a BOJ replacement who will play nice—and keep liquidity flowing.
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