With Bank of Japan Gov. Toshihiko Fukui’s term expiring in 11 days, the government and ruling bloc on Friday finally nominated one of his deputies, Toshiro Muto, to replace him at the central bank.
The long-expected nomination, submitted to the Diet for approval, puts the ball in the high-stakes dispute in the court of the Democratic Party of Japan, the largest opposition force.
However, DPJ Secretary General Yukio Hatoyama said Friday afternoon that it would “not be easy” for the party to accept Muto’s nomination. DPJ lawmakers have earlier indicated the party, for the sake of ensuring the independence of the monetary policy body, is against promoting a former vice finance minister to BOJ governor.
Muto must be endorsed by both chambers of the Diet, including the opposition-controlled Upper House.
The government also nominated former BOJ Executive Director Masaaki Shirakawa and University of Tokyo professor Takatoshi Ito as the next two BOJ deputy governors.
Chief Cabinet Secretary Nobutaka Machimura said they were the best candidates for the job.
“Judging from (the nominees’) experience, knowledge and international experience, I think they are the best lineup for the BOJ governor and deputy governors,” Machimura said in the afternoon.
The government’s top spokesman said efforts would continue to persuade the opposition camp into backing the endorsements.
The steering committees of both the Lower and Upper Houses will hold hearings for the nominees Tuesday, in which the three will explain their policies and answer questions.
The government hopes to have the nominees approved by the end of next week.
The five-year terms of Fukui, Muto and Deputy BOJ Gov. Kazumasa Iwata all end on March 19.
While the ruling coalition of the Liberal Democratic Party and New Komeito hold a comfortable majority in the Lower House, the DPJ-led opposition camp controls the upper chamber following the coalition’s heavy losses in the election last July.
Lawmakers in the DPJ and other opposition parties have indicated they are against appointing Muto due to concerns that promoting a former Finance Ministry bureaucrat will compromise the central bank’s independence in formulating monetary policy.
Prime Minister Yasuo Fukuda, who doubles as LDP president, expressed his willingness Thursday to negotiate the issue with DPJ leader Ichiro Ozawa.
However, the DPJ appeared to be still reluctant to accept Muto’s nomination after Ozawa and other senior leaders of the party discussed their response.
“In reality, I don’t think it will be easy,” Hatoyama told reporters after the DPJ leaders’ talks. Another participant in the meeting also said the DPJ’s opposition to Muto’s nomination is “unchanged.”
The DPJ plans to make a formal decision Tuesday or Wednesday about whether to approve the nomination of Muto, according to a lawmaker involved in the party’s screening of nominees for the new BOJ leadership.
“We would like to make a decision soon, so that even if we reject (Muto), the government will have time to resubmit” other candidates for the BOJ post, the lawmaker said.
“Honestly speaking, (Muto) is far from our ideal image of (BOJ) governor,” DPJ member Tatsuo Kawabata of the Lower House Steering Committee also said after hearing the nominations.
Kawabata said the party is concerned that Muto will be susceptible to government influence.
The BOJ chief “would have to hand down various difficult judgments on finance, the economy, people’s lives and even the world,” Kawabata said. “While (the BOJ chief) would need insight on these various worlds, our party has discussed that it would be best to eliminate someone who would be likely to be deeply influenced” by the Finance Ministry, he said.
Some in the DPJ also expressed skepticism about Muto’s knowledge of finance, given that he spent much of his career in the Finance Ministry’s Budget Bureau. They said they would listen to what he has to say Tuesday.
During a news conference last month, Ozawa said there are many different opinions in the DPJ but refused to clarify whether he backed Muto’s promotion.
“I know Muto very well from his Finance Ministry days,” Ozawa said. “But that and whether he is qualified to be BOJ governor are different questions.”
The DPJ also battled Muto five years ago, when he was nominated to be one of the BOJ’s two deputies.
“I think (qualifications as a BOJ chief) depend on the person, regardless of background,” Fukuda told reporters Thursday evening in responding to the DPJ’s arguments.
He also said the BOJ chief should have rich experience and knowledge of financial affairs and be someone who can work actively in international society.
Finance Minister Fukushiro Nukaga also warned that a vacancy in the top BOJ position must be avoided.
“The Bank of Japan’s independence is maintained. It is necessary to keep consistency between monetary and economic policies and the two should be coordinated,” Nukaga said, also rebutting the DPJ’s claim that a former Finance Ministry official should not lead the central bank.
The government had earlier planned to announce the nominations by early or mid-February. But with a divided Diet, things did not go smoothly.
Tensions in the Diet exploded Feb. 29 after the ruling Liberal Democratic Party and New Komeito rammed the fiscal 2008 budget through the House of Representatives and handed it over to the Upper House for deliberation.
The opposition responded by boycotting the budget deliberations in the Upper House for a whole week.
Some LDP lawmakers blame the DPJ for taking the BOJ nominations hostage in a political tug-of-war, a claim the DPJ denies.