Japan finally gets new central bank chief

TOKYO - Japan finally filled a vacancy at the head of its central bank on Wednesday after weeks of wrangling as the opposition approved the government’s third candidate just in time for a crucial meeting of world finance chiefs.

By (AFP)

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Published: Wed 9 Apr 2008, 2:58 PM

Last updated: Sun 5 Apr 2015, 11:36 AM

Ending a political stalemate that left the top job empty amid a global credit crisis, both houses of parliament approved deputy governor Masaaki Shirakawa, a career central banker who has been the acting head since last month.

The opposition voted down the first two candidates, saying that as former top financial bureaucrats they were too cosy with the government to defend the Bank of Japan’s independence.

Investors breathed a sigh of relief at the end to the first leadership vacuum in eight decades at the bank, which came as global policymakers were stepping up joint efforts to shield the financial system from a cash crunch.

“Finally having a legitimate governor should give a great deal of relief to the market,” Norinchukin Research Institute senior economist Takeshi Minami said.

The Bank of Japan was forced to wrap up a two-day interest rate meeting Wednesday with no governor, opting to leave its super-low interest rates unchanged at 0.5 percent, where they have been for more than one year.

Tokyo had sought to end the leadership vacuum to avoid sending an acting chief to a meeting of finance leaders from the Group of Seven rich nations in Washington on Friday, when global market turmoil will top the agenda.

But the political row was not fully over, as the upper house also rejected the government’s choice for one of the two deputy governor posts, Hiroshi Watanabe, a former senior finance ministry official.

“It was a very disappointing result,” said government spokesman Nobutaka Machimura.

“Frankly speaking, I don’t understand why they did not agree to the nomination of Mr Watanabe, who has good knowledge in international finance, administrative skills and a respected personality,” he told reporters.

The political flap over the BoJ came amid a wider political deadlock that has sent the government’s approval ratings sliding as the opposition Democratic Party holds up key legislation after its upper house election win last year.

“We are having such difficulty handling parliamentary affairs here,” said a visibly irate Prime Minister Yasuo Fukuda as he sparred with opposition leader Ichiro Ozawa in parliament.

“I feel that you pushed us around over the issue of BoJ nominations because you control one of the two houses,” he said.

The government says the Bank of Japan’s next deputy governor should be from the finance ministry to ensure good coordination between monetary and fiscal policy, while the opposition rejects giving top jobs to former bureaucrats.

“Japan’s political and administrative system has been trapped in a system controlled by bureaucrats,” said Ozawa. “We should not tolerate that.”

The BoJ has repeatedly come under pressure from the government to maintain a cheap credit policy so as to give Asia’s largest economy more time to recover from years of sluggish growth and deflation.

An expert on monetary policy with no government background, the 58-year-old Shirakawa is seen by analysts as a safe choice who is unlikely to cave in to political pressure over monetary policy.

He is seen as the brain behind the central bank’s unorthodox ”quantitative easing” policy which until 2006 flooded the banking system with virtually free money after zero interest rates alone failed to end years of deflation.

“As we are moving to a situation where traditional monetary policy may be losing traction because of the credit crisis, to have somebody who is experienced in this kind of non-traditional monetary policy is a big bonus,” said Glenn Maguire, chief economist for Asia at Societe Generale.

Shirakawa spent more than three decades at the BoJ, ascending to executive director before leaving in 2006 to become a professor. He was appointed one of the two deputy governors last month.

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