Switching its stance to gain Diet approval, the government nominated two economists who have consistently called for more aggressive monetary-easing measures as members of the Bank of Japan's Policy Board.
Members of the ruling and opposition parties have persistently called for such measures to propel an economic recovery before Prime Minister Yoshihiko Noda carries out his plan to increase the consumption tax rate.
The two nominees are Takahide Kiuchi, 48, with Nomura Securities Co., and Takahiro Sato, 50, of Morgan Stanley MUFG Securities Co.
Kiuchi has often appeared on television programs commenting on the economy. He has called on the BOJ to cut interest rates as part of aggressive monetary-easing measures and to correct the trend toward a strong yen.
In a report released early in June, Kiuchi wrote about BOJ Governor Masaaki Shirakawa: "I do not feel his sense of urgency about falling stock prices. The market would highly evaluate a stance of trying new policies."
Sato was also critical of the BOJ Policy Board meeting in March that decided not to take additional monetary-easing measures.
He said, "If it is unable to even proceed smoothly with further easing measures, it will be unable to achieve its inflation target of 1 percent."
The Diet’s rejection of the previous nominee obviously affected the government's decision to turn to two monetary-easing hawks.
Ryutaro Kono, a chief economist at BNP Paribas Securities (Japan) Ltd., was voted down in April by the Diet.
Kono was an advocate of restoring the nation's fiscal condition and critical of excessive monetary-easing measures.
Members of both ruling and opposition parties criticized Kono as leaning too much toward the policy positions of the Finance Ministry and BOJ.
But some lawmakers have criticized the latest nominations.
"The two are economists, and I question the wisdom of not nominating someone with actual knowledge about the real business world," an opposition party member said.
However, one member of the ruling Democratic Party of Japan said the nominations were safe choices.
A senior opposition lawmaker agreed, saying, "As long as the individual is not a strong opponent of monetary easing, we will not oppose the nomination."
That has led to greater confidence among government officials that the two economists will be approved.
But it is still unclear if the BOJ will be able to implement additional monetary-easing measures in an intermittent manner as a means of pulling the economy out of its deflationary condition.
Shirakawa has been passive about additional measures. Even with two monetary-easing hawks added to the Policy Board, decisions still have to be agreed to by majority vote of the nine members, so there may not be a sudden change in course on the part of the BOJ.
However, Izuru Kato, chief economist of Totan Research Co., said, "Discussions within the Policy Board may become more active."
The possibility of a major change in policy course could come next spring, when the terms expire for Shirakawa and two deputy governors.
(This article was written by Yukio Hashimoto and Yukako Ito.)
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