Why the Bank of Japan needs a female leader

Why the Bank of Japan needs a female leader

For the next several weeks, financial circles in Tokyo will be abuzz with intrigue over who will replace Haruhiko Kuroda as governor of the Bank of Japan.

Kuroda’s 10-year term ends on April 8. Prime Minister Fumio Kishida is expected to announce Kuroda’s successor in February. The markets estimate that he will be one of his two deputies, Masayoshi Amamiya or Masazumi Wakatabe.

However, Kishida would do well to shock the world by naming a woman in his place.

The decade during which Kuroda controlled Japan’s monetary policy has been a lost decade for the female half of Japan’s 126 million people. And, in turn, to solve the gender inequalities that undermine Asia’s second largest economy.

It’s not Kuroda’s fault. But the last 10 years are a warning of missed opportunities from the ruling Liberal Democratic Party that hired him in 2013.

All available research, from the International Monetary Fund to Goldman Sachs, shows that the nations that best utilize female labor are the most dynamic, innovative, and productive. Not empowering women is the economic equivalent of tying a member behind your back.

This own goal dynamic finally dawned in Tokyo a decade ago. At the time, Prime Minister Shinzo Abe spoke early and often about a push for “womanomics” to allow the other half of the population to prosper and up Japan’s economic game.

In 2014, Abe said that “until now, corporations have been driven by the ideas of men. But half of the consumers are women. The introduction of women’s ideas would lead to a new innovation. When we achieve a society in which women shine, we can create a Japan full of vitality.”

Abe’s LDP set a national goal of filling 30% of senior positions in public and private institutions with women by 2020. Unfortunately, politics itself turned out to be a shiny object.

There was no mechanism to meet the objective. No real incentives or penalties. CEOs and the patriarchy in general remained business as usual. For 2016, the targets were lowered to 7% for senior government positions and 15% in companies. Then, they were largely forgotten.

What cannot be forgotten is how precipitously Japan’s gender rankings have fallen over the past decade. In 2012, when Tokyo launched the womenomics PR campaign, it was ranked 101st in the World Economic Forum’s gender gap index. By 2022, Japan had fallen to 116th place behind Burkina Faso, Tajikistan, and Guatemala.

Japan is now 14 rungs behind China, not exactly a place to impress women’s empowerment organizations. And 17 places behind South Korea, where Yoon Suk-yeol won the presidency in 2022 on an “anti-feminist” platform.

Tokyo fares even worse when it comes to women in politics, ranking 139th out of 146 countries. This puts it behind Bahrain, Jordan and Saudi Arabia. Investors also can’t be happy with the few Nikkei 225 companies that have had a female CEO or president.

Even the PLD’s alleged gender successes require an asterisk. Sure, the female labor participation rate is rising. But up to two-thirds of those positions are “non-regular,” offering less pay, fewer benefits and negligible job security.

What better way to turn the tide than to appoint the first female leader of the BOJ? The BOJ has never even had a female lieutenant governor. Breaking the application cycle in which only men need to apply to the BOJ headquarters could inject fresh perspectives into an institution that is rapidly losing confidence in global markets.

Look no further than the BOJ’s inaction this week. For 29 days after the BOJ changed its bond yield policy on Dec. 20, traders braced for a bold “taper down” move. The markets were, in effect, ready for Kuroda’s team to begin undoing a decade of epic asset purchases. The BOJ objected.

The point is, if a globally respected politician like Kuroda, who enjoys considerable gravitas in Tokyo political circles, did not have the courage to change course, even modestly, are we to believe that his successor will? In reality, 24 years of zero interest rates, and the last 10 of even more aggressive quantitative easing, have the BOJ essentially trapped.

The “groupthink” that had long prevailed in the BOJ seems even more entrenched. It means the institution is seriously afraid of being blamed for sinking the stock and bond markets or sinking growth. Things will most likely remain on autopilot if Tokyo opts for a “safe” replacement for Kuroda from the BOJ core casting.

Going with a female governor could inject new ideas into the mix. And indeed there are good candidates. Take Tokiko Shimizu, for example, who in May 2020 became the first female CEO in a place founded in 1882. Her appointment to oversee BOJ international affairs at the decidedly male-dominated institution marked important progress.

The head of a think tank, Yuri Okina, tops the lists of possible candidates. So does former BOJ board member Sayuri Shirai, who has long proposed a policy overhaul that would allow officials to adjust interest rates more flexibly.

Along with a new leadership energy, appointing a female BOJ leader would put Kishida’s party back on the offensive when it comes to diversifying leadership ranks. And why stop there?

Role models matter. Also lead by example. At the moment, Kishida’s cabinet includes only two women, and in less prominent roles. This is emblematic of the tokenism that has dominated the LDP. During the late Abe’s 2012-2020 premiership, and his previous 2006-2007 tenure, he appointed a couple of women here and there, but always handed over the top jobs to men.

Neither Kishida nor Abe nor the 2001-2006 reformist prime minister Junichiro Koizumi appointed a woman to head foreign affairs or finance or to act as chief cabinet secretary. And, with all due respect, how can anyone say that Kishida’s CFO, Shunichi Suzuki, has excelled in his work? Why not name a female replacement there as well?

The BOJ’s top seat is an ideal time for Kishida to remind the world that his shaky government has a pulse and a clue as to how to regain economic momentum.

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