Conservative Fukui nominated to head BoJ

TOKYO: After 40 years at the Bank of Japan building up the financial expertise and connections that earned him the nickname “Prince of the BoJ,” Toshihiko Fukui may finally have his chance to be king. 

Hidenao Nakagawa, parliamentary affairs chief of the ruling Liberal Democratic Party, announced yesterday that 67-year-old Fukui, a policy conservative, had been nominated as the next head of the central bank, a choice that analysts said could disappoint those hoping for radical action to fix the economy. 

That choice, however, was tempered by the nomination of Kazumasa Iwata of the Cabinet Office – known as a proponent of unconventional monetary policies – and former vice finance minister Toshiro Muto as deputy governors. 

The nomination of Iwata and Muto suggests coordination between the BoJ and the government will go more smoothly and that the Finance Ministry, which favours a more aggressive monetary policy, will have significant influence on the central bank. The new appointments are subject to approval by parliament. 

The choice of a new governor to succeed Masaru Hayami, whose term ends on March 19, has been seen as a test of the leadership of Prime Minister Junichiro Koizumi, under fire for his handling of the economy, and is also key to whether the central bank will get tough in the fight against deflation. 

Analysts said it was unlikely there would be any radical change soon, though the appointment of Iwata, a proponent of aggressive policies, pointed to the possibility of a shift. 

“Fukui does maintain the status quo. And so for those in the market looking for aggressive monetary policy directions from the next governor, they are likely to be disappointed,” said Thio Chin Loo, senior currency analyst at BNP Paribas in Singapore. “I think Fukui is the most consensual selection among the bureaucracy in Japan, so it’s seen to be a safe choice.” 

The race for the top central bank job had been seen as one between those supporting radical measures such as inflation targeting, under which the BoJ would deliberately push up prices, and those who think such policies are too risky and would reduce pressure on the government to implement vital structural reforms. 

In recent weeks, however, the debate had become blurred. 

Fukui, a former BoJ deputy governor, had long been considered a frontrunner for the job and his likely appointment was reported in Japanese media yesterday. But the yen came under pressure following the announcement on the view that Iwata may push the BoJ towards inflation targeting. – Reuters  

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