Bank of Japan Governor Kuroda $235,000 Salary Highlights Goldman Concern

Kuroda $235,000 Salary Highlights Goldman Concern

Bank of Japan Governor Haruhiko Kuroda’s payslip is 38 percent less than his predecessor’s 15 years ago, underscoring Goldman Sachs Group Inc.’s warning that wages must rise for Abenomics to succeed. The central bank chief’s pay is about 24 million yen ($235,000) for the year ending March 31, down from an inflation-adjusted 39 million yen in fiscal 1998, based on a BOJ statement on Nov. 29. Swaps signal an average inflation rate of 1.2 percent over the coming five years, compared with 2.03 percent in the U.S. and 1.38 percent in the euro zone.Japan’s cost of living rose in October by the most in five years even as salaries extended declines from June 2012, threatening to derail Prime Minister Shinzo Abe’s efforts to sustain a recovery in the world’s third-largest economy. Goldman’s chief Japan strategist Kathy Matsui on Dec. 4 called for higher wages, while Kuroda told regional business leaders this week that he expects an increase in basic pay.

“Unless wages gain in Japan, higher prices will reduce purchasing power, hurting consumer spending and risking a slowdown in the economy,” said Akio Kato, the team leader of Japanese debt in Tokyo at Kokusai Asset Management Co., which manages the equivalent of $38 billion. “It would be meaningful for the BOJ to take the initiative by hiking the governor’s pay,” which is “rather low,” Kato said.

Bernanke’s Paycheck

Federal Reserve Chairman Ben S. Bernanke is set to receive $199,700 this year, while European Central Bank President Mario Draghi pulled in 374,124 euros ($511,200) last year. Bank of England Governor Mark Carney earns a basic salary of 480,000 pounds ($784,000).

Kuroda would need 25 years of his current salary to be able to afford a 10-year-old condominium with three bedrooms in central Tokyo that was priced at the equivalent of $5.8 million, according to a listing on Nomura Real Estate Holdings Inc.’s website. A similar-sized home in the city’s eastern suburbs 30 minutes by train from downtown sells for about $672,000.

Consumer prices excluding fresh food rose 0.9 percent in October from a year earlier, government data showed. BOJ policy makers forecast the price growth, stripped of the effects of tax increases planned starting April, will quicken to 1.3 percent next fiscal year and to 1.9 percent in 2015.

“Modest pay gains are expected considering the recovery in the labor market, but we can’t anticipate a wage rise that’s fast enough for the BOJ to achieve its 2 percent price goal,” said Toru Suehiro, a market economist in Tokyo at Mizuho Securities Co. “Once it gets clear that the upward price path foreseen by the BOJ is unlikely to happen, it will provide a catalyst for nominal yields to decline.”

Record Yield

Japan’s benchmark 10-year note yield rose four basis points, or 0.04 percentage point, to 0.67 percent today, after earlier touching 0.68 percent, the highest since Oct. 1. It reached a record low of 0.315 percent on April 5, the day after Kuroda and his board doubled monthly bond purchases to stoke 2 percent inflation in two years. The yen has fallen 15 percent this year to 102.10 per dollar as of 3:33 p.m. in Tokyo.

The central bank cut the governor’s salary last year by 30 percent as a temporary measure to reduce costs while the nation rebuilt after the March 2011 earthquake. The decrease wasn’t reversed this year with the pay kept at the same level.

“Salaries for the Bank of Japan’s officers are determined in consideration of the remuneration and other circumstances of national public officers, as stipulated by the BOJ Act,” Yasutaka Hirata, a central bank spokesman, said without elaborating further.

Tax Increase

The nation’s public debt has ballooned to more than 1 quadrillion yen and is expected by the International Monetary Fund to grow to the equivalent of 244 percent of gross domestic product this year, the highest ratio globally. Abe approved raising Japan’s consumption tax to 8 percent from 5 percent in April 2014 and will decide whether to increase it to 10 percent the following year.

“Considering Japan’s finances, the sales tax may have to go higher even after being hiked to 10 percent,” said Maiko Noguchi, a former BOJ official and a Tokyo-based senior economist at Daiwa Securities Co., Japan’s second-biggest brokerage. “It will be a problem if the economy experiences a sharp fall every time the sales tax is raised and voters cry out in displeasure.”

Companies have the cash to increase wages if they choose. Domestic non-financial private companies held 220 trillion yen in cash and bank deposits at the end of June, almost the size of Brazil’s annual GDP, the latest data from the BOJ show. The amount reached 224 trillion yen in March, the most on record dating back to 1997.

Intensifying Competition

“There won’t be many companies that increase base salaries unless they can expect sustained earnings growth,” said Daiwa’s Noguchi. “Modifying existing products doesn’t create large demand. Instead, intensifying competition cuts companies’ profit margins, and this can’t be easily changed by Abenomics.”

The Japanese Trade Union Confederation, or Rengo, plans to demand pay increases of more than 1 percent during labor talks in spring, according to a statement released in October.

Household consumption accounted for 58 percent of Japan’s real GDP last year, according to Cabinet Office data.

“The government needs to fuel domestic consumption to boost GDP, and the only way is to raise wages,” said Satoshi Okagawa, a senior global-markets analyst in Singapore at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “Policy makers want to convert companies’ accumulated earnings into consumer spending, but businesses won’t listen to their plea. That’s why Kuroda is suffering.”

To contact the reporters on this story: Masaki Kondo in Singapore at; Mariko Ishikawa in Tokyo at; Shigeki Nozawa in Tokyo at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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