In new BOJ chief, Abe must weigh management, policy skills

January 16, 2013

THE ASAHI SHIMBUN

When Prime Minister Shinzo Abe nominates the new Bank of Japan governor, he will choose which carries more weight: the ability to run a large organization and work with bureaucrats and politicians; or aggressiveness in monetary policies.

Abe met with financial experts and Cabinet members on Jan. 15 to hammer out a set of policies the new governor should push for.

Government officials say supporting Abe’s policy of pursuing further monetary easing measures is the “minimal requirement” for the new governor, whose appointment must be approved by both chambers of the Diet.

The five-year term for Masaaki Shirakawa, the current governor of the central bank, expires in April.

Of the six candidates being rumored to replace Shirakawa, the favorite of the Finance Ministry and the BOJ is Toshiro Muto, 69, for his “guaranteed” skills for managing a large organization and coordination abilities.

Muto served as administrative vice minister of the Finance Ministry, the highest-ranking post for ministry bureaucrats, before he became a deputy governor of the BOJ in 2003.

For nearly 30 years from 1969, the new governor had alternated between coming from the Finance Ministry and the BOJ.

But three career BOJ officials, including Shirakawa, have assumed the post in a row since 1998, when the revised BOJ Law took effect to increase the central bank’s independence.

The possible appointment of Muto would amount to the Finance Ministry “recovering lost territory.”

Many BOJ officials also support Muto’s appointment because they view him as being well-connected to influential politicians in both the ruling and opposition camps, and expect he would shield the central bank from heightening political pressure to resort to extreme monetary policy measures.

But some advocates of drastic monetary easing close to Abe have criticized Muto, saying he is “not eager” to take additional measures.

Haruhiko Kuroda, 68, a former vice finance minister for international affairs who now serves as the president of the Asian Development Bank, has also surfaced as one of the hopefuls.

But government officials say that it will not be wise for Japan to appoint Kuroda to the BOJ post because he has almost four more years at the helm of the ADB until his term expires in 2016.

“It will be a blow if China takes the presidency after he quits halfway through,” an official said.

If the government places importance on “bold” monetary policy, Kazumasa Iwata, 66, Takatoshi Ito, 62, and Heizo Takenaka, 61, emerge as leading contenders.

Iwata is president of the Japan Center for Economic Research, and he previously served as a BOJ deputy governor.

He advocates the purchase of foreign bonds by the BOJ and the government to expand credit easing and weaken the yen.

Ito was deputy vice finance minister for international affairs before he became a professor of economics at the University of Tokyo.

He is one of the first economists who began calling for the BOJ to set an inflation target.

Takenaka, economics professor at Keio University, believes the central bank should be held more accountable for the consequences of its policy.

He pushed the disposal of bad loans in the banking industry as part of structural reform under the administration of former Prime Minister Junichiro Koizumi.

But he has created many enemies in political circles by promoting structural reform, including liberalization in employment practices and the financial sector.

Ito and Takenaka are qualified for the post in terms of holding a Ph.D, a requirement cited by Your Party, a reform-minded opposition party.

A sixth candidate is Kikuo Iwata, economics professor at Gakushuin University, who has long called on the BOJ to set an inflation target to stamp out deflation.

But some government officials are cautious about appointing an individual who is less experienced in running a large organization and working with politicians and bureaucrats.

“I wonder if it is a good idea to appoint a person like an academic who has barely managed an organization,” Finance Minister Taro Aso has said.

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