TOKYO — In the late 1990s, in the thick of the Asian financial crisis, a top Japanese Finance Ministry official turned to his protégé and found him engrossed not in policy documents, but in a chunky volume of the works of Aristotle.
That bookish aide, Haruhiko Kuroda, was confirmed as the next Bank of Japan governor, one of the most thankless jobs in a major economy plagued for decades with economic problems. He will need more than Aristotelian logic to turn years of the central bank’s policies on their head.
The Japanese prime minister, Shinzo Abe, who took office in December, has pointed his finger at the central bank and its seemingly hapless monetary decision-making as the root cause of the country’s economic woes. The bank must take a far tougher stance against deflation, Mr. Abe has demanded, to stem the sluggish profits, spending and investment that have weighed on the Japanese economy since the 1990s.
Mr. Kuroda, 68, is tasked with bringing about a regime change at the bank, something he himself, a critic of the bank, has previously called for. His track record of disparaging the bank for not doing more to fight deflation as well as a career that has spanned the stodgy halls of Japanese bureaucracy and the negotiation tables of global finance convinced Mr. Abe that he was the man for the job, officials say.
“Speed is of the utmost importance,” Mr. Kuroda told a parliamentary hearing on Monday. “I intend to pursue bold monetary easing, both in scale and in quality.”
It will be a tough job, though one that offers a chance to right the Bank of Japan’s blemished history of missteps and blunders.
The Bank of Japan’s woes reach back to the mid-1980s, when it lowered interest rates to prop up an economy reeling from a rapidly strengthening yen. And despite signs that the easy money was helping to fuel a spectacular bubble economy, the bank kept interest rates low, finally tightening policy in 1989. By that time, stock and land prices had more than quadrupled from five years earlier.
The painful memories of the collapse of that bubble and the drawn-out economic pain it has brought the Japanese economy have paralyzed the bank’s decision-making, critics including Mr. Kuroda charge. The bank progressively lowered its policy interest rate through the 1990s, hitting zero in 1999, but was reluctant to try more unconventional policies. The governor at the time, Masaru Hayami, thought the possibility of a return to Japan’s bubble economy was still all too real and argued that deflation was not entirely a bad phenomenon.
By 2001, Japan’s economy was again slumping and the bank finally tried its hand at buying up assets to create new money in the economy, a policy known as quantitative easing. Even then, the bank officials continued to publicly voice doubts over that policy’s effectiveness, even exiting quantitative easing at the first signs of an uptick in the economy in 2006.
As the global economic crisis plunged Japan’s economy into its worst recession in decades, the bank has again been slow to adopt an expansionary monetary policy. Until recently, the bank also refused to set a clear inflation target.
Mr. Kuroda has long been a critic of the bank’s missteps. In his 2005 book, “Success and Failure in Fiscal and Monetary Policy,” he denounces the bank for constantly standing behind the curve in its understanding of the economy and deflation.
“It is dead wrong to assume that once policy interest rates are at zero, nothing much else can be done,” Mr. Kuroda wrote. “Fundamental responsibility for preventing deflation lies in monetary policy,” he added.At parliamentary hearings, Mr. Kuroda has committed to expanding Japan’s monetary base to achieve a goal of 2 percent inflation, a level not seen since the early 1990s. He said he would do “whatever it takes” to beat deflation and restore economic growth. He said in a hearing Tuesday that he would be aggressive in buying long-term government bonds, as well as corporate assets, to pump more funds into the economy.