Masaru Hayami took the helm as governor of the trouble-stricken Bank of Japan on March 20, emphasizing the need for the central bank to protect its independence and ensure transparency in policymaking as the revised BOJ Law takes effect April 1.

Hayami, 72, frankly admitted the downside of maintaining the all-time low interest rates, but said the official discount rate should not be raised until the economy recovers. He called the recent arrest of a BOJ official on a bribery charge a "shame," but said the resignations of Gov. Yasuo Matsushita and Senior Deputy Gov. Toshihiko Fukui suffice in terms of supervisory responsibility. "I am going to protect the bank's independence and not act in the interests of particular groups or individuals," Hayami said in a news conference, in a quiet, sometimes unclear voice. "There must be friction (with politicians), but if we can't do it, we cannot function as a central bank."

Hayami and new Senior Deputy Gov. Sakuya Fujiwara, a journalist who assumed the post the same day, jointly met reporters for an hour at the BOJ's head office in Tokyo. Hayami worked at the BOJ for 34 years until 1981, when he was an executive director. He later served as chairman of Nissho Iwai Corp., a major trading firm, and became the head of the Japan Association of Corporate Executives (Keizai Doyukai), a major business lobby.

He and Fujiwara were selected and appointed by the Cabinet to replace Matsushita and Fukui. Hayami hailed the revision of the law, saying monetary policy sympathetic to everyone eventually hurt people. The German central bank Bundesbank, which helped West Germany reconstruct itself after World War II without undue obedience to the government, is the ideal, he added.

The BOJ has been strongly influenced by the Finance Ministry and the government because of the nature of the current BOJ Law, which was implemented during the war in 1942.

About the low interest rates, Hayami said he feels the negative impact as a citizen. Pensioners and various corporations, including educational institutions, are having hard time managing their funds, he said.

But the aftereffects of the bubble's burst remain, and banks and firms need to profit with the help of lower rates, he added.

The official discount rate, which affects various interest rates such as those for bank deposits and housing loans, has been kept at an all-time low at 0.5 percent since September 1995. Although the central bank holds the right to control the rate, politicians have often intervened.

"An important issue is whether the time will come to raise the rate" during his five-year term, Hayami said. He also said he believes that financial system trouble has peaked but said his assessment might be overly optimistic.

About the currency crisis of Asian countries, he said pegging their currencies only to the U.S. dollar was the primary cause.