The Democratic Party of Japan said Tuesday that it will reject the government’s nomination of Toshiro Muto for new Bank of Japan governor, even though Muto pledged to ensure the BOJ’s independence during testimony to the Diet.
The DPJ also will oppose the nomination of University of Tokyo professor Takatoshi Ito as one of the BOJ’s two deputy governors, and support that of Kyoto University professor Masaaki Shirakawa, DPJ Secretary General Yukio Hatoyama said.
The BOJ nominees must be approved by both Diet chambers, including the opposition-controlled Upper House.
The Upper House steering committee decided later in the day to hold a vote Wednesday on Muto’s nomination, which is now certain to be rejected by the DPJ-led opposition camp. The ruling coalition earlier said the votes should be held Friday in both Diet chambers.
Prime Minister Yasuo Fukuda said he “could not understand why the DPJ opposes” Muto’s nomination. “I’m troubled,” he told reporters after hearing of the decision.
Hatoyama said the decision was reached in a meeting Tuesday afternoon held by the largest opposition party’s top executives.
Hatoyama said the DPJ wants a Wednesday Diet vote to secure time for the government to submit alternates before current BOJ Gov. Toshihiko Fukui’s term expires March 19. The DPJ and other opposition parties, however, offered no names.
Government officials had indicated they would resubmit Muto’s name, even if the proposal is rejected by the DPJ-led opposition camp.
However, Hatoyama said the attempt would be a “waste of time” and urged the government and ruling bloc to look for new candidates.
The nomination of Muto, a former vice finance minister who for the past five years has been deputy BOJ governor, is unacceptable because it would be impossible to ensure the BOJ’s independence from the government with a former top ministry bureaucrat at its helm, Hatoyama said as he explained the DPJ’s decision.
“In one word, (Muto) is a figure who represents the Finance Ministry itself,” Hatoyama said. “It is not our decision that all candidates are unacceptable just because they used to be with the Finance Ministry. But Mr. Muto had been dubbed ‘Mr. Finance Ministry.’ “
The DPJ decision came hours after Muto vowed to lawmakers that he will ensure the BOJ’s independence, urging the divided Diet to back him as the new chief.
“I would like to increase transparency on monetary policy and I think that communication with the public and with the market is extremely important,” Muto said during a confirmation hearing at the Diet. “Based on these ideas, I will make efforts to gain public trust and firmly secure the BOJ’s independence.”
The Diet held hearings Tuesday at both the Lower and Upper houses for Muto, along with fellow nominees Shirakawa and Ito for the positions of deputy governors. The hearings were also followed by question-and-answer sessions from lawmakers.
Shirakawa, a former BOJ executive director, said the central bank must consider medium- to long-term risks to the economy when making monetary policy decisions.
Ito, well known for favoring inflation targeting, said Japan should follow many other countries in introducing a policy framework with which the central bank makes public its projected inflation rate and pursues monetary policies to achieve the inflation target.
During Tuesday’s hearing at the Lower House, Muto stressed that he would devote himself to the position if appointed new BOJ chief. “I want to contribute to the Japanese economy and draw out the comprehensive power of the BOJ all the while remaining truthful to the ideals of the Bank of Japan Law,” he said.
After the hearing, Yoshito Sengoku, a Democratic Party of Japan lawmaker, said his impression of Muto had not changed. Sengoku, who questioned Muto during the hearing, said the candidate didn’t have a clear answer as to whether he would revamp the BOJ’s monetary policy.
Muto also tried to counter the DPJ argument that his Finance Ministry background compromises his ability to ensure the BOJ’s independence.
“I want you to consider my last five years (as deputy governor),” Muto was quoted by a ruling Liberal Democratic Party member as saying. “I have worked as a BOJ official who secured independence and transparency in accordance with the law.”
While criticizing the government for nominating Muto, the DPJ has failed to name an alternative candidate.
With the DPJ opposition, it is now uncertain if Muto can replace Fukui when his term ends on March 19. If there were to be a vacancy in the top BOJ post, it could affect the economy and damage Japan’s credibility, experts say.
Fukuda has ruled out any other candidate, saying Muto is “the best” choice.
Previously, the approval process of BOJ chiefs was carried out behind closed doors, but all parties agreed on making the procedure as open as possible this time.
Information from Kyodo added