In a postwar first, the Bank of Japan lacks a chief following the Upper House rejection Wednesday of the government’s latest candidate to replace BOJ Gov. Toshihiko Fukui, whose five-year term ended the same day.
The leadership vacuum at the central bank is likely to deal a heavy blow to Prime Minister Yasuo Fukuda amid the ongoing global financial market crisis.
Fukuda told reporters that he is “keenly aware” of his responsibility for the vacancy.
A senior government official indicated the prime minister would wait until next month to nominate someone else as BOJ chief because the ruling coalition will have to focus on ensuring Diet passage of the fiscal 2008 budget and related tax bills in time for the new fiscal year, which starts April 1.
The opposition-controlled Upper House vetoed the nomination of Koji Tanami, governor of state-backed foreign aid agency Japan Bank for International Cooperation and a former Finance Ministry bureaucrat. He was the second candidate to be nominated by the Liberal Democratic Party-New Komeito ruling bloc-led government and the second to be rejected.
The ruling bloc’s majority got Tanami approved by the Lower House. But without the upper chamber following suit, the candidacy was doomed. The Lower House has no authority in this case to override the Upper House’s decision.
Both chambers, meanwhile, voted in favor of Kiyohiko Nishimura, a former University of Tokyo professor and a BOJ Policy Board member, to fill the second of two deputy BOJ governor positions. Last week, Masaaki Shirakawa, a Kyoto University professor and a former BOJ executive director, gained Diet approval.
Until a new governor is appointed, Shirakawa will serve as acting governor.
Tanami is the second of Fukuda’s nominees for central bank governor to be rejected by the Upper House. BOJ Vice Gov. Toshiro Muto, also a former top Finance Ministry bureaucrat, got the thumbs down last week.
“As Tanami was almost the same as Muto, we couldn’t approve him even if we wanted to,” said Azuma Koshiishi, Upper House president of the largest opposition force, the Democratic Party of Japan. “Of course, we didn’t want to leave the top seat of the BOJ empty.”
On Tuesday, only a day before the end of Fukui’s term, the government floated its second choice for BOJ chief. But after sessions in both chambers of the Diet, the DPJ by Tuesday evening had decided to reject Tanami.
Not only was Tanami’s experience in international finance questioned, but it was also claimed his background as a vice finance minister would align the BOJ too closely with the ministry, the same reasoning given for Muto’s rejection.
The Social Democratic Party and Japanese Communist Party also voted him down for the same reasons.
“I don’t think it was clear to the public why a former vice finance minister was not qualified (for the job). It should be based on the person’s character, his views and political neutrality,” LDP Secretary General Bunmei Ibuki said after Wednesday’s Lower House vote. He added that the BOJ leadership vacuum would have a psychological impact on the financial markets.
“The opposition forces should recognize that having control of the Upper House means they are half responsible for the government. They should have taken a broader view of the situation in making their decisions,” Ibuki said.
Fukuda meanwhile said, “I tried to submit the nominees in time to avoid (a vacancy), but unfortunately, (the nominations) were rejected.”
Fukuda said he would do his best to name another candidate as soon as possible, adding he still hopes the opposition parties support that nominee.
When asked what caused the BOJ’s leadership vacuum, Fukuda indicated he misread the DPJ’s responses to his nominees, saying, “many lawmakers in the DPJ said different things and various information (about the party’s position on the issue) was up in the air.”