Upper House rejects Muto

by Masami Ito and Setsuko Kamiya

The Bank of Japan is a week away from a vacuum at the top as the opposition-controlled Upper House on Wednesday voted down the government’s bid to replace BOJ Gov. Toshihiko Fukui with his deputy of five years, Toshiro Muto.

To avoid the first postwar top-level vacancy, the government and Liberal Democratic Party-New Komeito ruling bloc must either persuade the opposition camp to back a renominated Muto or find an acceptable candidate before Fukui exits on March 19.

The Democratic Party of Japan, the largest opposition force, argues that handing the top spot to a former vice finance minister puts the BOJ at risk of falling under the sway of the government.

In urging the opposition parties to back him during Tuesday’s Diet hearing, Muto had vowed to remain independent on monetary policy.

“We did not reject (Muto) in order to turn (the BOJ appointees) into a political issue,” DPJ Secretary General Yukio Hatoyama claimed Wednesday. “We did so because we believe (Muto) is not suitable and if the government chooses an appropriate candidate, it is fully possible (the next governor) will be elected (by March 19).”

Ruling bloc executives said Wednesday afternoon they would push to hold talks with the opposition camp as quickly as possible to resolve the stalemate, but offered no new names. Masayuki Naoshima, policy chief of the DPJ, indicated, however, that his party was against the talks with the ruling bloc.

Chief Cabinet Secretary Nobutaka Machimura, mum about whether the government plans to name another candidate, meanwhile insisted there were no specific rules prohibiting Muto’s renomination.

“You cannot submit the same bill (to the Diet again once it has been rejected), but I don’t think there is such a rule for appointees,” Machimura told reporters.

Earlier this week, Prime Minister Yasuo Fukuda also stressed that he has no intention of putting forward anyone other than Muto, whom he called “the best choice.”

But a senior government official hinted that a “second best” might be unavoidable if the opposition camp, which has offered no names itself, does not change its mind.

Along with Muto, the Upper House also voted down Takatoshi Ito, a University of Tokyo professor, as one of the two new deputy chiefs.

The second candidate for those positions, Masaaki Shirakawa, a Kyoto University professor and former BOJ executive director, was approved by the upper chamber.

This action appears to open the door for Shirakawa, who is also expected to be endorsed by the Lower House, to serve as acting BOJ governor if the Diet fails to endorse a new chief by March 19.

The Lower House, in which the ruling bloc holds a comfortable majority, is set to approve the three nominees Thursday, although without the endorsement of both chambers the nominations of Muto and Ito will fail.

“According to one line of reasoning, the situation could change if the Lower House approves (Muto and Ito), and (we) ask the Upper House, once again, to reconsider,” Machimura said. “But whether that is politically possible is another question.”

Hatoyama ruled out that his party will change its position on Muto.

“It is impossible to reject (Muto) once and then approve (him after he is renominated),” Hatoyama said. “That would be deceiving the public.”

After Muto and Ito were rejected, DPJ lawmakers criticized Fukuda for submitting the BOJ nominees so close to the end of the current governor’s term.

“Prime Minister Fukuda should have submitted (the nominees) in early February to ensure enough time (for deliberations),” said Kohei Otsuka, a DPJ member of the Upper House and a former BOJ official. “I think Fukuda’s lack of leadership has triggered this confusion.”

But Machimura disagreed.

“I don’t think the timing (of the nominations) was wrong,” Machimura said. “I think (Fukuda) presented (the nominees) just in time before it was too late.”

In terms of legislation and other matters, Article 59 of the Constitution allows the Lower House to override a rejection by the Upper House with a two-thirds majority in a second vote. But as no such rule exists for appointees, BOJ nominees must be approved by both houses.