Next BOJ Governor Candidate: "Japan Must Accelerate Transition to a Carbon-Neutral Society"

Nakaso Former Deputy Governor "Abenomics Needs a Third Arrow Focused on Eco-Friendly Investment"

Former Deputy Governor of the Bank of Japan (BOJ), Nakaso Hiroshi
Photo by Reuters Yonhap News

[Asia Economy Reporter Park Byung-hee] Nakaso Hiroshi, former Deputy Governor of the Bank of Japan (BOJ) and a leading candidate for the next BOJ Governor, argued that a rapid transition to a carbon-neutral society is necessary to raise Japan's potential growth rate.

According to major foreign media on the 16th, former Deputy Governor Nakaso emphasized expanding eco-friendly investments and mentioned the third arrow of Abenomics.

Abenomics refers to the economic stimulus policies implemented by former Prime Minister Shinzo Abe when he began his second term in December 2012. Abe mentioned three arrows for economic stimulus at that time. The first and second arrows refer to large-scale fiscal and monetary easing policies for economic stimulus, while the third arrow refers to growth policies through structural reforms aimed at raising the potential growth rate. While fiscal and monetary easing policies were strongly implemented, structural reform policies were not properly executed. Japan's potential growth rate still remains below 1%.

Former Deputy Governor Nakaso said that eco-friendly development investments would help raise Japan's potential growth rate and that a growth strategy focused on promoting a carbon-neutral society is necessary. He also stated that a financial hub for eco-friendly companies should be established in Tokyo.

Former Deputy Governor Nakaso said that the prescriptions of Abenomics to revive the Japanese economy were correct, but too much burden was placed on the first and second arrows. As a result, short-term interest rates remain negative, and the BOJ's asset holdings have increased 4.5 times compared to before the implementation of Abenomics.

Former Deputy Governor Nakaso emphasized that the third arrow needs to be implemented faster and stronger. He said that measures to achieve carbon neutrality could be a breakthrough for Japan, which is struggling to raise its potential growth rate. He also mentioned that the large funds accumulated through savings could be used to increase investments in the green revolution.

Former Deputy Governor Nakaso is considered the most likely successor to BOJ Governor Kuroda Haruhiko, whose term expires in April next year. Nakaso joined the BOJ in 1978 and served as Deputy Governor during Kuroda's first term. He currently serves as the Chairman of the Organization of Global Financial City Tokyo.