Stimulus advocates tapped for BOJ slots

by Toru Fujioka

Bloomberg

The government has nominated two economists to the Bank of Japan’s Policy Board who have previously signaled support for stimulus, underscoring forecasts for policy makers to expand asset purchases in coming months.

Prime Minister Yoshihiko Noda’s administration on Monday tapped Takahide Kiuchi of Nomura Securities Co. and Takehiro Sato of Morgan Stanley MUFG Securities Co., pending confirmation by the Diet.

The picks broke with a practice of choosing candidates from similar backgrounds to the board members they replace: The retired members had business backgrounds.

The nominees would join a central bank that has boosted its asset fund by ¥20 trillion this year yet been faulted by lawmakers for failing to do enough to end deflation and stoke growth.

Sato said in an interview last month the BOJ’s inflation forecast for next year is “wishful thinking,” and Kiuchi said the bank may need to cut growth and price forecasts.

“Both nominees have indicated that the BOJ has to take more actions,” said Chotaro Morita, chief strategist for fixed income at Barclays Capital Japan Ltd. “Whether they join or not, the BOJ may have to do more soon as uncertainties remain high in the global economy, especially in Europe.”

The Diet will probably vote on the appointments around June 21, opposition lawmaker Yousuke Tsuruho, who sits on a joint committee that received the nominations, said Monday.

The five-year terms of former Policy Board members Seiji Nakamura and Hidetoshi Kamezaki, who had been executives in shipping and trading-company industries, concluded April 4.

The BOJ concludes its next policy meeting, a two-day session, this Friday. The International Monetary Fund on Tuesday said in an annual review of Japan’s economy that further BOJ easing would accelerate achievement of its inflation target, and that the yen’s exchange rate is overvalued from a medium-term view.

The nominations are a chance for lawmakers to push the BOJ to do more to end decade-long deflation and bolster growth as the nation’s debt burden limits flexibility in fiscal policy. The economy’s rebound from last year’s earthquake-affected contraction is forecast to slow in the second half as reconstruction fades and Europe’s crisis bites.

Monday was the second attempt by the government to fill at least one of the openings. On March 23, it sent just one name to the joint Diet committee, Ryutaro Kono, BNP Paribas SA’s chief Japan economist. While the Nikkei newspaper reported that Kohei Watanabe, an adviser to trading house Itochu Corp., would be tapped, he wasn’t nominated.

Kono was rejected after some lawmakers said he wasn’t aggressive enough regarding the use of monetary stimulus to end deflation. After his rejection, Kono said that some politicians were pushing economic policies “entirely divorced from reality” and making “unrealistic” demands on monetary policy.