Shirakawa humbled at taking BOJ helm

Professor of monetary policy now calling shots

by Kanako Takahara and Setsuko Kamiya

Voted in as expected Wednesday by the Diet as the 30th Bank of Japan governor, Masaaki Shirakawa was quick to take a middle-of-the-road stance and note that instead of being a professor of monetary policy he is now in the position of setting it.

Shirakawa, who had been BOJ deputy governor but also acting governor while the central bank’s helm remained vacant for the last three weeks amid the standoff in the divided Diet, said in his first news conference Wednesday night at BOJ headquarters in Tokyo that he is not comfortable with being considered either a hawk or a dove on monetary policy. A hawk would be someone eager to raise the interest rate and tighten monetary policy.

“Monetary policy is decided based on the economic and financial state of the time,” he said. “One cannot be labeled.”

Shirakawa further commented on how his life changed drastically over the past month.

“I was a university teacher a month ago and would have been lecturing about monetary policy at this hour,” he said. “Instead I am now in the position of deciding monetary policy. Honestly speaking, I am perplexed.”

During his news conference after his appointment became official, and after the opposition-controlled Upper House rejected the Liberal Democratic Party-New Komeito ruling bloc’s nomination of Hiroshi Watanabe as BOJ deputy governor, Shirakawa refused to comment on the political impasse.

The House of Representatives, where the ruling bloc holds a majority, endorsed Shirakawa’s nomination after the House of Councilors, effectively controlled by the Democratic Party of Japan, approved him earlier in the day while nixing Watanabe.

The nine-member Policy Board has two vacant seats — a regular member and a deputy governor — a situation Shirakawa called “extraordinary.” Board member Kiyohiko Nishimura was tapped as one of the deputy governors.

“It is up to the Diet to appoint the top BOJ posts,” he said. “I hope suitable people will be appointed soon for the posts of deputy governor and Policy Board member.”

Shirakawa said Prime Minister Yasuo Fukuda called him Sunday to confirm that the ruling bloc would nominate him as BOJ governor, and he accepted the overture.

With Shirakawa’s appointment, Fukuda was able to save face because the government will now be able to send a serving BOJ governor to the Group of Seven meeting of finance ministers and central bank chiefs Friday in Washington.

But due to the Upper House’s rejection Wednesday of Watanabe, one of the two deputy seats of the BOJ will remain empty until the government finds a new candidate who can gain approval from the DPJ.

The DPJ said Tuesday evening it would reject Watanabe because of his background as a former senior Finance Ministry official.

Many key DPJ lawmakers believed Watanabe was a qualified candidate, due to his experience in the international monetary market.

But the DPJ’s executive committee, led by President Ichiro Ozawa, remained opposed to the golden parachuting of ex-Finance Ministry bureaucrats into BOJ executive seats and stayed committed to ensuring the independence of the central bank from the ministry when making policy decisions.

“We really want the government to stop nominating people we can’t endorse,” said Azuma Koshiishi, president of the DPJ’s Upper House lawmakers.

After Watanabe’s rejection Wednesday morning, Chief Cabinet Secretary Nobutaka Machimura criticized the DPJ’s reasons for the snub, citing the Bank of Japan Law, which stipulates that the BOJ has to consult closely with the government so its policies dovetail those of the state.

“So many countries in the world have central bank governors who were former Finance Ministry bureaucrats. The DPJ’s argument is nonsense,” Machimura said. “I can’t help speculating that the real reason for (Watanabe’s rejection) was (to create) political turmoil” in a bid to force an election.

The DPJ previously rejected ex-BOJ Deputy Gov. Toshiro Muto and Koji Tanami, who were both former vice finance ministers, for the BOJ’s top spot. Shirakawa, a former BOJ executive director, assumed the post of deputy chief on March 20 along with Nishimura, a former professor at the University of Tokyo.

Business leaders welcomed Shirakawa’s appointment Wednesday, saying it will allow him to attend the G7 meeting and prevent Japan from losing international trust.

“We welcome the end of the unusual vacancy of the central bank governorship ahead of a meeting of Group of Seven top finance officials (this weekend),” said Fujio Mitarai, chairman of the Japan Business Federation. Information from Kyodo was added