Diet set to approve BOJ nominees

Kyodo

The Diet is expected to approve the government’s nominees for Bank of Japan governor and its two deputy governor posts, with the largest opposition party set to give the nod for Asian Development Bank President Haruhiko Kuroda to head the central bank, lawmakers said Tuesday.

Besides Kuroda, the Democratic Party of Japan plans to accept the nomination of BOJ Executive Director Hiroshi Nakaso for one of the deputy governor posts but may reject the other nominee, Kikuo Iwata, a Gakushuin University professor who advocates bolder monetary easing to achieve the central bank’s 2 percent inflation target.

All three nominations, however, are expected to secure Diet approval, given that smaller opposition parties are planning to vote for Iwata.

The DPJ is finalizing its position following confirmation hearings in the House of Representatives for Kuroda on Monday, and for Nakaso and Iwata on Tuesday.

“There is no problem with Kuroda,” a senior DPJ lawmaker said after the hearings. The lawmaker cited Kuroda’s stance on maintaining the BOJ’s independence and his global experience.

As for Iwata, DPJ lawmaker Keisuke Tsumura, who attended the hearings, said, “I feel uncomfortable about having someone who is publicly calling for the BOJ Law to be revised leading the BOJ,” adding he cannot approve the appointment of Iwata.

DPJ policy chief Mitsuru Sakurai said he does not believe someone who advocates “excessive reflation” should be appointed.

Iwata said during the Lower House hearing that the BOJ “needs to be totally responsible for” achieving 2 percent inflation in the consumer price index, a goal Prime Minister Shinzo Abe’s Liberal Democratic Party-led government pressured the BOJ to accept. The target “can be attained in two years at the latest. I believe it has to be,” he said.

Iwata also said the BOJ must “further promote quantitative easing” to maintain the yen’s weakness against other major currencies and rallies in Tokyo stocks.

He added that the BOJ Law, which ensures the central bank’s independence, needs to be revised to attain the inflation target swiftly and smoothly.

If the central bank fails to achieve the goal, Iwata said, “Resigning (from the post) would be the best way to take responsibility.”

Nakaso told the panel: “Now is the best opportunity to overcome deflation and realize sustainable growth under price stability. . . . Utilizing such an opportunity is the BOJ’s major mission.”

He said he would like to contribute as one of the central bank’s nine Policy Board members to quickly achieve the 2 percent inflation target.

On Monday, Kuroda vowed to pursue bolder monetary easing, saying that achieving 2 percent inflation as soon as possible is critical and the BOJ must make clear it is prepared to “do anything” to arrest deflation.

Confirmation hearings for the three are planned next week in the House of Councilors.

The appointments of the BOJ governor and deputy governors must be approved by both chambers of the Diet. As the LDP-led ruling coalition lacks a majority in the Upper House, support from the DPJ would allow smooth approval.

The DPJ will formally decide on the plan to approve Kuroda and Nakaso next Tuesday, as the ruling bloc is seeking a vote on the three nominations in the Lower House on March 14 and in the Upper House on March 15.

Despite the possible opposition from the DPJ, the government could still obtain Diet approval for Iwata’s nomination in the Upper House, as smaller opposition parties, including Your Party, are likely to vote for him.

Finance Minister Taro Aso expressed hope Tuesday that Kuroda would tackle deflation in line with a joint policy statement signed by the government and the BOJ.

“We believe that if Mr. Kuroda becomes governor, he will steer monetary policy in the direction” set out in the joint statement released in January, in which the BOJ agreed to the 2 percent inflation target, Aso said.

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