DPJ to vote for Kuroda as new BOJ chief but will oppose Iwata as deputy

Kyodo

The Democratic Party of Japan said Tuesday it will support Asian Development Bank President Haruhiko Kuroda as the next Bank of Japan governor but will oppose Gakushuin University professor Kikuo Iwata’s nomination as one of the two BOJ deputy governors because of his extreme stance on monetary policy.

The endorsement by the DPJ, the largest opposition force, of the ruling Liberal Democratic Party’s choice of Kuroda to succeed incumbent BOJ Gov. Masaaki Shirokawa paves the way for the Diet to vote him in later this week. Kuroda is an advocate of strong monetary easing to fight deflation.

But the DPJ’s “shadow Cabinet” will reject Iwata because of his extremist stance, party lawmakers said.

“We should not leave (a top BOJ post vacant) . . .,” DPJ policy chief Mitsuru Sakurai told reporters after the meeting. “We decided to endorse (Kuroda) because we need to fulfill our political responsibility.”

In 2008, the DPJ repeatedly rejected BOJ nominees chosen by the then-LDP-led government, leaving the governor’s post vacant for a period.

Sakurai added, however, that the DPJ was not satisfied with Kuroda’s remarks during Diet confirmation hearings, particularly regarding how the BOJ can achieve its 2 percent inflation target, warning his party could oppose Kuroda’s nomination when Diet approval is required again next month. Because Shirakawa is stepping down early, his successor would only technically be allowed to serve until the incumbent’s term officially ends on April 8, then face re-election to the post.

The Diet is slated to vote on Kuroda and the two deputy governor nominees Thursday in the House of Representatives and Friday in the House of Councilors. Committees of the two chambers have completed confirmation hearings on the candidates Abe’s government has selected, including Hiroshi Nakaso as the other BOJ deputy governor.

The nominees to head the BOJ must be approved by both chambers of the Diet. Abe’s LDP-New Komeito ruling coalition lacks a majority in the Upper House, but his three BOJ picks are expected to win Diet backing despite the DPJ snub of Iwata.

Even before his formal nomination late last month, just floating the name of Kuroda, a former vice finance minister for international affairs, had triggered a market reaction favorable to the struggling economy, with the yen sharply falling against other major currencies and Tokyo stocks rebounding strongly.

The DPJ has apparently judged it would benefit no one to reject Kuroda, who has endorsed Abe’s economic goals, centering on aggressive monetary easing by the BOJ to achieve a 2 percent inflation target.

With support from both the LDP-led coalition and the DPJ, Kuroda is certain to become the successor to Shirakawa, who will step down early on March 19 along with his two deputies after five years in office. Kuroda plans to leave the ADB on March 18.

The DPJ will vote in favor of Nakaso, currently the bank’s assistant governor in charge of international affairs, but turn down Iwata, whom it believes does not properly recognize the risks of excessively accommodative monetary conditions.

But the nomination of the professor, who has said he would resign as deputy governor if the BOJ fails to achieve the inflation goal within two years, is expected to clear the Diet with support from smaller opposition parties.