Why Bank Of Japan Needs A Female Leader

Over the next few weeks, Tokyo financial circles will buzz with intrigue over who’s replacing Haruhiko Kuroda as Bank of Japan governor.

Kuroda’s 10-year run ends on April 8. Prime Minister Fumio Kishida is expected to announce Kuroda’s successor in February. Markets reckon it will be one of his two deputies, Masayoshi Amamiya or Masazumi Wakatabe.

Yet Kishida would be wise to surprise the globe by naming a woman instead.

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, for sorting out the gender inequalities undermining Asia’s No. 2 economy.

It’s not Kuroda’s fault. But the last 10 years are a cautionary tale of lost opportunities on the part of the ruling Liberal Democratic Party that hired him in 2013.

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

This own goal dynamic finally dawned on Tokyo a decade ago. At the time, Prime Minister Shinzo Abe talked early and often about a “womenomics” push to enable the other half of the population to thrive and raise Japan’s economic game.

In 2014, Abe said that “corporations have so far been driven by men’s ideas. But half the consumers are women. Introducing ideas by women would lead to new innovation. When we realize a society where women shine, we can create a Japan full of vitality.”

Abe’s LDP set a national target of filling 30% of senior positions in both public and private institutions with women by 2020. Sadly, the policy itself turned out to be a shiny object.

There was no mechanism to meet the goal. No real incentives nor penalties. CEOs, and the patriarchy in general, stuck to business as usual. By 2016, the targets were downgraded to 7% for senior government jobs and 15% at companies. Then, they were largely forgotten.

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

Japan is now 14 rungs behind China, not exactly a place that impresses women’s empowerment organizations. And 17 spots 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. Nor can investors be happy with how few Nikkei 225 companies have ever had a female CEO or chairperson.

Even the LDP’s alleged gender successes require an asterisk. Sure, the female labor participation rate is rising. But as many as 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 name the first female BOJ leader? The BOJ has never even had a female deputy governor. Breaking the only-men-need apply cycle at BOJ headquarters could inject fresh perspectives into an institution fast losing trust in global markets.

Look no further than the BOJ’s lack of action this week. For 29 days after the BOJ tweaked its bond yield policy on December 20, traders braced for a bold “tapering” move. Markets were, in effect, ready for Kuroda’s team to begin unwinding a decade of epic asset purchases. The BOJ demurred.

Thing is, if a globally respected policymaker like Kuroda, who enjoys considerable gravitas in Tokyo political circles, lacked the courage to change course, even modestly, are we to believe 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 long prevailed at the BOJ seems even more ingrained. It means the institution gravely fears being blamed for plunging stock and bond markets or cratering growth. Odds are, things will remain on autopilot if Tokyo goes with a “safe” Kuroda replacement from BOJ central casting.

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

Think tank head Yuri Okina tops shortlists of potential female candidates. So does former BOJ board member Sayuri Shirai, who’s long proposed a review of policies that allow for officials to adjust interest rates more flexibly.

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

Role models matter. So does leading by example. At the moment, Kishida’s cabinet includes just two women, and in less prominent roles. This is emblematic of the tokenism that’s dominated the LDP. During the late Abe’s 2012-2020 premiership—and his earlier 2006-2007 one—he named a couple of women here and there, but always giving top posts to men.

Neither Kishida nor Abe nor reformist 2001-2006 Prime Minister Junichiro Koizumi named a female to head foreign affairs or finance or to act as chief cabinet secretary. And, with all due respect, how can anyone say Kishida’s finance chief, Shunichi Suzuki, has excelled at his job? Why not name a female replacement there, too?

The top BOJ job is an ideal moment for Kishida to remind the world that his flailing government has a pulse—and a clue of how to regain the economic momentum.