On March 20, former Bank of Japan Deputy Gov. Toshihiko Fukui will replace current BOJ Gov. Masaru Hayami as head of Japan's central bank. Mr. Fukui, now director of the Fujitsu Research Institute, will be assisted by two new deputies: Mr. Toshiro Muto, former vice minister of finance, and Mr. Kazumasa Iwata, a senior official of the Cabinet Office and an economics professor at the University of Tokyo.
The biggest challenge for the new BOJ triumvirate -- which was selected by Prime Minister Junichiro Koizumi on Monday, subject to parliamentary approval -- is to maintain independence in the conduct of monetary policy. That is easier said than done, however, given persistent pressure from the government and politicians. The current policy tug-of-war over inflation targeting is a case in point.
The central bank acquired greater independence as a result of a 1998 revision to the Bank of Japan Law. The governor's five-year tenure is guaranteed, meaning, among other things, that the government cannot dismiss him or her on grounds of policy disagreement. Still, the need for the bank to draw a line in the sand, so to speak, cannot be overemphasized. The BOJ is already beleaguered on all sides amid mounting calls, both here and abroad, for a more aggressive easing of its monetary policy.