Suga as next PM seen as mixed blessing for BOJ

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    TOKYO- The growing likelihood that Yoshihide Suga will succeed Shinzo Abe as Japan’s new premier may be a mixed blessing for the country’s central bank.

    As Abe’s key lieutenant and the government’s top spokesman, Suga is a safe pair of hands and has a thorough knowledge of the Bank of Japan’s policy framework, but he also knows how to pressure the bank into action.

    With Suga solidifying support within the country’s ruling party ahead of a leadership election later this month, Tokyo stocks have rallied on expectations Abe’s pro-growth policies will be maintained.

    The central bank, locked in a battle to cushion the blow from the coronavirus pandemic, sees little need for policy change regardless of who becomes next prime minister, sources familiar with its thinking say.

    Suga, in particular, could maintain the status quo if he takes the helm, given the key role he played in pushing through “Abenomics”, which sought to spur growth with bold monetary easing, fiscal spending and structural reforms.

    “He has a deep understanding of the BOJ’s policies, so the likelihood of policy continuity will heighten,” one of the sources said.

    “A Suga administration would maintain most of Abe’s policies,” including its stance on monetary policy, said a second source.

    For BOJ policymakers, Suga is a familiar face who is unlikely to bully the central bank with explicit demands for radical measures, the sources say.

    However, armed with a strong grip on Tokyo’s bureaucracy and a deep knowledge of Abe’s economic policies, Suga may prove to be a tough negotiator for the BOJ if conditions worsen, as it struggles to battle economic headwinds with a dwindling toolkit.

    “The BOJ comes under little pressure when markets are calm. That changes when markets turn volatile,” said a third source.