Kuroda’s replacement

Haruhiko Kuroda will go down in history as one of Japan’s greatest central bankers. His policies were not perfect, but given the political constraints he operated under he achieved a great deal.

He will be replaced by Kazuo Ueda, a 71-year old academic with an MIT background (one of Stanley Fischer’s students). Some describe him as mildly hawkish, but this Bloomberg piece suggests a more complex picture:

The first impression by the market has been that a surprise choice indicates a hawkish turn by [Prime Minister] Kishida. . . .

That may yet prove wide of the mark. . . .

As a BOJ board member, he dissented from that controversial decision in 2000 to raise the benchmark rate. That step by the bank was opposed by the government, and quickly turned into a fiasco. The global economy was already slowing down and the BOJ was forced to reverse course the following year. The incident deeply scarred the bank, and made policymakers in Japan extremely wary of backing away from easy money. It subsequently tried again in the lead-up to the global financial crisis, only to cut when the world economy tanked.

The decision by the BOJ to tighten policy in 2000 was a terrible mistake. I am pleased to learn that Ueda opposed the decision—it’s a strong indication that he has good judgment.



25 Responses to “Kuroda’s replacement”

  1. Gravatar of BJH BJH
    14. February 2023 at 11:26

    Scott, you might find this recent skeptical critique of the impact of monetary policy on the Japanese economy interesting — I would be curious what you think:


  2. Gravatar of Rajat Rajat
    14. February 2023 at 12:32

    Stephen Kirchner has a very interesting more detailed post on Ueda on his Substack: https://stephenkirchner.substack.com/p/the-bojs-blast-from-the-past

  3. Gravatar of Spencer Spencer
    14. February 2023 at 13:14

    Economists simply can’t differentiate between an individual bank and the system. All bank-held savings are frozen.

    Never are the DFIs financial intermediaries (conduits between savers and borrowers) in the savings-investment process. From the standpoint of the entire system and our domestic economy, commercial banks never loan out, and can’t loan out, existing funds in any deposit classification (saved or otherwise), or the owner’s equity, or any liability item.

    Every time a DFI makes a loan to, or buys securities from, the non-bank public, it creates new money – demand deposits, somewhere in the system. I.e., deposits are the result of lending and not the other way around. The DFIs could continue to lend even if the non-bank public ceased to save altogether.

    From the standpoint of the DFIs, the monetary savings practices of the public are reflected in the velocity of their deposits and not in their volume. Whether the public saves or dis-saves, chooses to hold their savings in the DFIs (commercial banks) or to transfer them to NBFIs (nonbank conduits) will not, per se, alter the total assets or liabilities of the DFIs nor alter the forms of these assets and liabilities.

  4. Gravatar of Spencer Spencer
    14. February 2023 at 13:18

    Japan’s “lost decade” is due to the impoundment and ensconcing of monetary savings in their banks. The BOJ has unlimited transaction deposit insurance, the Japanese save more, and keep more of their savings impounded in their banks.

    “Japanese households have 52% of their money in currency & deposits, vs 35% for people in the Eurozone and 14% for the US.”

  5. Gravatar of ssumner ssumner
    14. February 2023 at 16:21

    BJH, I guess I fall somewhere in between these two. I certainly believe the BOJ policy had the effect of boosting Japan’s real GDP, but the figure cited by Yudkowsky (“trillions of dollars”) seems excessive.

    A few points:

    1. In the long run, money is neutral. Hence monetary stimulus won’t impact the long run level of Japan’s RGDP or employment.

    2. There’s a lot of evidence that Kuroda’s policies boosted Japan’s NGDP.

    So here’s the issue. How much evidence is there that faster NGDP growth boosted Japan’s real economy (and employment) for a period of time? (Alternatively, how flexible are Japanese wages and prices?)

    I’d say there is substantial evidence. Japanese stocks responded as if the policy was boosting growth. Unemployment fell to levels well below the 2006 boomlet. Also, keep in mind that growth in Japan’s working age population slowed sharply in the past decade, so trend RGDP growth is slowing substantially. Growth held up better after the 2014 tax increase than after the previous (1997?) version. Thus if Yudkowsky’s evidence was too cursory, so is this critique.

    To summarize, the article makes some good points, but only shows that Yudkowsky might be wrong, not that he is wrong. I still think there’s lots of evidence that he was right and the pessimists at the BOJ were wrong, even if he exaggerates the benefits.

    As an aside, he mentions my name. But people with very different views on monetary policy effectiveness—such as Paul Krugman (2018)—also see the evidence as clearly suggesting that Kuroda’s policy worked to some extent.

    (There’s lots more I could say, but I’m on vacation.)

    Rajat, Thanks. That was helpful–much better than this post. One small quibble regarding the final paragraph. Yield curve control is actually not at all like Svensson’s foolproof reflation approach, as one involves a price and the other involves a flow variable. Exogenous exchange rate depreciation is inflationary, low interest rates may or may not be inflationary.

  6. Gravatar of David S David S
    16. February 2023 at 01:19

    Oh, by the way, when you return from your trip we will still not have tight money here. The last 25 bp hike was too timid. After the policy mishaps of 2021 and the catch-up game of 2022 the Fed has achieved “medium” money, which does not imply that things are in the right place, but rather that NGDP will run too hot for another 4-6 months.

  7. Gravatar of ssumner ssumner
    16. February 2023 at 05:00

    David, I agree. I hope my book (which should come out in late March) will be well-timed. It explains why high rates are not tight money.

  8. Gravatar of Sara Sara
    21. February 2023 at 17:05

    I find it interesting that the Austrians continue to be correct, over and over and over again, and yet your entire profession is still, to the detriment of society, inundated with descendants of Irving “I lost everything in 1929” Fischer; and if that wasn’t bad enough, the other side descends from an unintelligible book, published by another 1929 loser, homosexual and scatterbrain, who claimed savings is a disease and that only consumption matters.

    How Samuelson fell for that I will never know. And why the Chicago “Retard” school adopted Irving “I lose everything” Fischer’s quantity theory of garbage is like a big joke upon humanity.

    Why don’t you just admit the truth. You don’t like the Austrians laissez fair approach because it means your profession is useless, worthless, archaic, dumb — at best — and at worst it’s a ponzi scheme against the tax payer.

  9. Gravatar of Spencer Spencer
    23. February 2023 at 08:53

    The strict quantity theorists regard the velocity of money as a datum which can be ignored in the long run. This implies no long-term up or down trend in velocity. The data does not support this assumption. It is evident that the differences in Vt are so pronounced, and the periods involved of such length, that no theory which ignores changes in velocity can purport to be an accurate explanation of the role of monetary forces in the economy.

    See: “The Case of the Missing Money” STEPHEN M. GOLDFELD Princeton University

    See: Velocity: Money’s Second Dimension – By. Bryon Higgins

    “Money has a ‘second dimension’’, namely, velocity . . .. ” Arthur F. Burns in Congressional Testimony.

    See: “Quantity leads and velocity follows” Cit. Dying of Money -By Jens O. Parsson

    See: “Was the 1982 Velocity Decline Unusual?” – by JOHN A. TATOM

  10. Gravatar of Ricardo Ricardo
    26. February 2023 at 00:00

    It’s even worse than that.

    The profession doesn’t just comprise moron monetarists and know-nothing Keynesians: you also have the editor of the Mises Institute whose quite literally one of the dumbest people I’ve ever met.

    How does someone like Ryan Mckaken become an editor? Is that really the best America can do? I thought the Mises Institute could afford someone a bit more intelligent, but….apparently not.

    He also spends most of his time talking about secession, as if smaller city states will magically create his rothbardian utopia.

    So yeah, we are totally screwed. The monetarists, while smarter than Keynesians, fall for the same fallacies as Fischer. And the great Mises is being represented, wrongly, by an imbecile.

    It should be obvious that keeping interest rates below the natural rate, as they did in the 1920’s, and between 2008 to 2022 comes with significant consequences; these morons think they can avoid popping the bubble but they are very much mistaken because the only way to get it back to 2% is to increase interest rates above the inflation rate by at least a few percentage points, which means 7-8%, possibly more, and you cannot do that because the fiscal debt is too high and you won’t be able to service it at those interest rates. They should just let the market drop to 15K to get prices back to normal, because that’s about where it should be. 32K is just a reflection of their bad policy.

    It should be obvious that deflation is necessary to reach equilibrium. And yeah, it’s painful for a year or two. But it’s a lot more painful to create massive bubbles using temporary interventions, and in the process, make them so big that when the bubble does finally burst entire nations starve to death.

    In other words, we are now permanently stuck at 4% inflation, possibly higher, all because of Sumner’s so-called “liberal party” really a modern reactionary party, and his deep and dark hunger for war (Ukraine, Afghanistan) and his monetary views.

    I suggest taking a short position, then laugh as Sumner meets the same fate as Fischer and Keynes. Hopefully, when the crash comes he’s also trading from his bed like Keynes. It would be a fitting end to a third rate mind.

    Let’s just hope low IQ McKaken and his Rothbardian idiots don’t replace the monetarists because that would be even worse.

    We need a resurgence of true intellectuals like Rose Wilder Lane and Isabel Patterson. In short, we need to remove the degenerate babyboomers and return to the old right.

  11. Gravatar of Spencer Spencer
    26. February 2023 at 09:12

    Powell should have known that the money stock can never be properly managed by any attempt to control the cost of credit. The 1951 Treasury-Reserve Accord should have established the validity of that dictum.

    Monetarism has never been tried. An increase in reserve requirements or reserve ratios immediately depresses prices. There is no lag effect. Bankrupt-u-Bernanke drained legal reserves for 29 contiguous months, turning safe assets into impaired assets, which caused the GFC.

    In 2010, the PBOC’s RRR went to 18.5% – “to sterilize over-liquidity and get the money supply under control in order to prevent inflation or over-heating”

    An example is; Some people think Feb 27, 2007 started across the ocean. “On Feb. 28, Bernanke told the House Budget Committee he could see no single factor that caused the market’s pullback a day earlier”.

    In fact, it was home grown. There was a marked drop in legal reserves during that accounting period. It was the seventh biggest one-day point drop ever for the Dow. On a percentage basis, the Dow lost about 3.3 percent – its biggest one-day percentage loss since March 2003.

    But Powell destroyed deposit classifications and removed reserve requirements. Powell believes banks are intermediaries (unlike William McChesney Martin’s punch bowel).

  12. Gravatar of Spencer Spencer
    26. February 2023 at 10:32

    The deceleration in M2 is entirely due to dis-savings (drop in savings deposits relative to means-of-payment money). At some point, this decrease in money demand, temporary rise in Vt, will end.

  13. Gravatar of msgkings msgkings
    26. February 2023 at 11:22

    Since you haven’t made a new post yet on this, I’ll put this here:


    Now the conspiracy theorists will think everything they imagine is true. They never heard Keynes’ line: “When the facts change, I change my opinion. What do you do, sir?”

  14. Gravatar of Solon of the East Solon of the East
    26. February 2023 at 18:08

    Stanley Fischer is an advocate of money-financed fiscal programs.

    Recently, Bank Indonesia (purchased) monetized $60 billion of Indonesian national debt as issued, to get the nation through the pandemic.

    The rupiah did not depreciate much (if at all), and since has resumed its long-term appreciation.

    I hope some (at least one or two) Western macroeconomists review the Indonesian central bank actions.

    The central bank monetization of debt seems to be an Indonesian success story, and the national government is not as indebted as it would have been if it issued government bonds on the global market.

    Is Fischer right? Can money-financed fiscal programs be added to national tool-kits with success?

    “Money is neutral in the long run”? But really?

    Meaning over several decades or longer?…But people live in decades, not centuries.

    And what happened to Greece? Their economy contracted by 25% under EU austerity programs back in 2008-10…and never recovered. Still down 25%.

    Is that a good monetary policy?

    Interesting topic…needs some fresh air.

  15. Gravatar of Christian List Christian List
    26. February 2023 at 18:26

    Except that the basic facts have never changed.

    From the very beginning the first relevant outbreak of this new kind of corona virus happened right in the city of one of the very few corona virus research facilities in the world. It is quite difficult to find a laboratory that has conducted similar intensive and immersive research on coronavirus as Wuhan.

    And it has now taken the FBI and the US Energy Department only three years to “find” the most likely explanation. Wow. I am really impressed.

    It is similar to the “mystery” why Putin insisted on building a new gas pipeline directly between Germany and Russia for many years, although there was never any need for it. Unless of course, like the critics said, one plans a war against Ukraine, in which you have to bypass Ukraine and Poland.

  16. Gravatar of Edward Edward
    27. February 2023 at 08:09


  17. Gravatar of ssumner ssumner
    27. February 2023 at 09:22

    msgkings, I see the WSJ is still peddling discredited “evidence” such as the three researchers who mysteriously required hospitalization in 2019.

    A lab leak is possible, but the animal market remains more likely.

    And that article presents exactly zero evidence for either hypothesis.

    Christian, I see you are still (implicitly) defending the CCP’s cover-up of the role of China’s shameful animal markets in this and previous global pandemics.

  18. Gravatar of Edward Edward
    28. February 2023 at 16:38

    Turns out I was right again. The virus did leak from the Wuhan lab.
    That’s another win for me, and another loss for Sumner.

    And even better, the so-called “progressives” who Sumner adores, are now on the run in El Salvador.

    Duterte, Bong Bong and Bukele are modern day heroes.

    The media of course will attack them endlessly, and the ICC will demand that they stand trial for crimes against humanity, standards, of course, set by unelected apparatchiks at globalist controlled supranationals, meanwhile each of those names have 80% support from the people who actually live there.

    Although, it appears, like Brazil, the globalists will manage to get their “progressive” Bola Tinabu – a former druglord – into Nigeria’s highest office. Of course, nobody in Nigeria remembers voting for him but that didn’t stop the globalists from slow rolling the votes over the past few days and, as you would expect, manufacture ballots so that he could amazingly, almost overnight, go from last place to first place.

    Same can be said for the commie, sao paulo forum member and former mob boss Lula Da Silva, who Sumner supports.

    Just remember that birds of a feather flock together.

    If you support Drug lords; if you often run to the aid and defend the CCP, and if you support a terrorist group like NATO and celebrate woke communist progressives like Da Silva, then you are probably of the same feather.

    And I don’t like to say NATO is a terrorist group, because it started with good intentions, but bombing 40 countries over the last forty years qualifies as terrorism. There is no greater threat to world peace than NATO. CCP and their Nazi 2.0 regime is a close 2nd.

  19. Gravatar of dtoh dtoh
    28. February 2023 at 19:55


    “A lab leak is possible, but the animal market remains more likely.”

    Looks like the FBI now also disagrees with you


  20. Gravatar of Spencer Spencer
    1. March 2023 at 12:07

    The FED changed the reporting of the money supply from weekly to monthly. This was done in an effort to shift attention away from money supply growth.

    Powell destroyed deposit classifications in May 2020 (eliminated the 6 withdrawal restrictions on savings accounts, which isolated money intended for spending, or means-of-payment money, from the money held as savings, or the demand for money (reciprocal of velocity).

    “it seems that the modification of Regulation D in late April has effectively rendered savings accounts almost indistinguishable from checking accounts from the perspective of depositors and banks. Accordingly, the composition of M2 between M1 and non-M1 components conveys little economic information.”

    What’s behind the recent surge in the M1 money supply?

    #1 “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time.”
    #2 “Inflation is not a problem for this time as near as I can figure. Right now, M2 [money supply] does not really have important implications. It is something we have to unlearn.”
    #3 “the correlation between different aggregates [like] M2 and inflation is just very, very low”.

    The rate-of-change in currency in circulation is back to 2010 levels. The 6-month roc in our means-of-payment money has turned negative. When the 10-month roc turns negative there will be a recession. But now the FED won’t know about it after a lag.

  21. Gravatar of ssumner ssumner
    1. March 2023 at 16:39

    dtoh, Of course that’s possible, but right now most of the evidence points to the animal market. If the lab leak proponents had any evidence, I’m quite confident we’d know what the evidence is. The government leaks like a sieve.

    By the way, I have consistently argued that for policy purposes we should assume it was a lab leak. I don’t think this one was, but the next one could be.

  22. Gravatar of ssumner ssumner
    2. March 2023 at 03:37

    Everyone, Go to page 8 of this 2021 report if you want to see the sorts of things that our intelligence services view as “evidence”


    I suspect that the new findings won’t be much different.

  23. Gravatar of sean sean
    2. March 2023 at 11:12

    The evidence points to the animal market as the first place main of the early clusters. A public place is always going to be the likely area that the virus spread to unrelated people. I don’t know if thats strong evidence that the virus origionated from the animal market or elsewhere.

    The truth is non of us are smart enough to assign probabilities to its origin. Is initial spread in the animal market evidence of animal origin stronger than some of the weird things like furin cleavage cites. I don’t have anyway to evaluate other people’s claims to assign probabilities.

    I believe you like quoting that Anderson? guy. One day he’s touting signs of lab manipulation and a few weeks later he’s saying from animal. I don’t know why he changed his position – evidence, politics, realized it makes his field look really bad and didn’t want to believe lab leak.

  24. Gravatar of dtoh dtoh
    2. March 2023 at 18:15


    ” If the lab leak proponents had any evidence, I’m quite confident we’d know what the evidence is.

    What are you locked in dungeon with no Internet. The evidence is overwhelming and no one except you any longer believes it was zoonotic origin.

  25. Gravatar of ssumner ssumner
    3. March 2023 at 02:59

    Sean, You said:

    “A public place is always going to be the likely area that the virus spread to unrelated people.”

    Please be serious. Wuhan is a giant city, with thousands of “public places”. What are the odds that the first cases would cluster around an animal market?

    “I believe you like quoting that Anderson? guy”

    Examples please?

    dtoh, I notice that you don’t mention any of this supposed evidence, as you know I’d immediately shoot it down. (As I’ve done in numerous posts.). Perhaps you are referring to that mistranslated Chinese document that the GOP senators paraded around like latter day Joseph McCarthys? Or the three sick lab workers?

    And 4 of the 6 US intelligence services are also in this internet dungeon? Quite the conspiracy. The Chinese must have infiltrated our government.

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