Having agreed on a ¥20 trillion economic stimulus package and a hefty ¥13.1 trillion supplementary budget, the next big task for Prime Minister Shinzo Abe and his Cabinet will be nominating the right person to head the Bank of Japan.
Abe told reporters Wednesday before heading out for a visit to Southeast Asia that he wants to find someone on the same page as him regarding monetary policy. He has repeatedly said his administration will pursue monetary easing “with measures from a different dimension.”
Traditionally, veteran BOJ officials and former Finance Ministry bureaucrats have taken turns as governor of the central bank. But since a revision of the Bank of Japan Law in 1998 gave the BOJ more independence, no former bureaucrat has been given the top job.
Nominees for the position require approval from both Diet chambers, including the opposition-controlled Upper House.
The current governor, Masaaki Shirakawa, has been a target of criticism for his lack of action, at least in the eyes of big-spender Abe. With Shirakawa’s term coming to an end April 8, names being tossed around as his successor are mainly advocates of loose monetary policies.
Former Vice Finance Minister Toshiro Muto, who served as a deputy BOJ governor from 2003 and 2008, leads the pack.
He was nominated for governor by the Liberal Democratic Party-led government in March 2008, but his bid was torpedoed by the Democratic Party of Japan, which claimed he was too close to the Finance Ministry and that his appointment would threaten the bank’s independence from the government. The DPJ knocked the LDP from power in the 2009 general election, only to see the tables turned by the LDP in last month’s poll.
The job eventually went to Shirakawa, a BOJ veteran.
Muto, 69, joined the Finance Ministry after graduating from the University of Tokyo and is currently serving as chairman of Daiwa Institute of Research. He has repeatedly suggested the BOJ should take bold measures to fight the deflation that has long bedeviled the economy.
Another name being mentioned as a possible successor to Shirakawa is University of Tokyo professor Takatoshi Ito, who was nominated as a deputy BOJ governor in 2008 to serve under Muto but was also turned down by the DPJ.
Ito is also a former bureaucrat, serving as deputy finance minister before his current teaching job at Todai. The 62-year-old, who holds a Ph.D. in economics from Harvard University and is fluent in English, has strongly supported introducing an inflation target for the consumer price index.
Kazumasa Iwata, 66, who served as a BOJ deputy governor together with Muto between 2003 and 2008, is also being reported as a possible candidate. He is regarded as having strong ties with foreign counterparts forged during his BOJ years. He is now president of the Japan Center for Economic Research.
In an interview with Jiji Press last month, the former bureaucrat said the level of collaboration between the government and the BOJ is “insufficient” and that the inflation target should be set at no lower than 1.5 percent instead of the current 1 percent.
Former Vice Finance Minister Haruhiko Kuroda, 68, who now heads the Asian Development Bank, is also possible candidate. While his term at the ADB doesn’t run out until 2016, his experience handling a major organization and knowhow in working with overseas counterparts are seen as attractive strengths.
Finance Minister Taro Aso has said the next BOJ governor should be “healthy, capable of running an organization and be able to communicate fluently” with heads of other countries’ central banks.
If any of the four front-runners get the job, it will be the first time for a former bureaucrat to hold the position since Yasuo Matsushita in 1993.
The opposition DPJ has so far remained unclear on whether it will endorse anyone with a bureaucratic background. Your Party, which holds 11 seats in the Upper House, has said it will likely oppose rehiring a retired senior bureaucrat as central bank chief.
The administration is expected to officially nominate its candidates for governor and vice governors by mid-February.