Solution sought in Bank of Japan deadlock
TOKYO: Senior Japanese lawmakers from the governing and opposition parties on Thursday called for a breakthrough by Monday to end the stalemate over the next governor of the Bank of Japan, hoping to avoid a monetary policy vacuum in the midst of an international credit market crisis.
“We have agreed that it is desirable to avoid a policy vacuum, even just for one day,” Kenji Yamaoka, parliamentary affairs chief for the main political opposition, the Democratic Party of Japan, told reporters after meeting his counterpart from the Liberal Democratic Party, Tadamori Oshima.
Toshihiko Fukui is scheduled to step down on Wednesday as governor of the central bank. The standoff over who will succeed him and his two deputies comes amid global market turmoil that sent Japanese shares down more than 3 percent and the yen to a 12-year high against the dollar Thursday.
The government on Thursday won a parliamentary vote in the lower house, which is controlled by the governing coalition, on its nominee for governor, Toshiro Muto, and its two candidates for deputy governors of the bank. But that outcome did nothing to clarify the situation because Muto has already been vetoed by the opposition in the upper house of Parliament.
A former Bank of Japan official, Masaaki Shirakawa, has been approved as a deputy governor by both houses after the upper house rejected Muto and the other deputy governor nominee, Takatoshi Ito, an academic. Shirakawa could serve as acting governor if the dispute is not resolved by Wednesday. Other options include extending Fukuis term or appointing someone else as acting governor.
Yamaoka said he had agreed with Oshima to request a new governor nominee, but Oshima and a government spokesman, Nobutaka Machimura, did not say whether they were thinking of offering a different choice.
While markets are focused on fears of a U.S. recession, traders said the political deadlock had hurt sentiment in Japanese stocks. “The yens gain and concerns about the Japanese economy and corporate earnings are pulling the Tokyo market down deeper than Wall Street,” said Yoshihiro Ito, a managing director at Okasan Capital Management. “Distrust in Japanese politics is also helping push down the market.”
The government must now either persuade the opposition parties to change their minds or offer a compromise candidate. “If the candidate cannot get approval, the government should come up with someone else, a Democratic Party official, Naoto Kan, said at a news conference. “I dont think there is any other way.”
Analysts say an acting governor might be unwilling to make important, long-term decisions, but they also point out that Japan, with interest rates at 0.5 percent, has little room to maneuver in monetary policy, regardless of who heads the Bank of Japan.
“The market has to some extent prepared for the risk of a vacuum at the BOJs top position,” Atsushi Ito, a Japanese government bonds strategist at Morgan Stanley. “Rather than who becomes BOJ governor, problems in the United States and Japans economic slowdown play a far more significant role in deciding the BOJs policy.”
Ichiro Ozawa, the Democratic Party leader, sat impassively at the back of the lower house chamber as the vote was held Thursday. Some analysts say that he holds the key to resolving the issue and that he will have to meet Prime Minister Yasuo Fukuda to negotiate a deal. Ozawa has vowed to push the governing coalition into an early election.
Opposition lawmakers have consistently opposed Muto mainly because of his close ties to the government as a former top bureaucrat in the Ministry of Finance, a relationship they say would hurt the independence of the central bank.
