TOKYO (Thomson Financial) - Japan's two major parties signalled Sunday they
would reach a compromise on the next central bank chief, with only three days
left before the post falls vacant amid global market turmoil.
The opposition hinted it would back one of two potential candidates to lead
the central bank of the world's second largest economy, amid signs the ruling
coalition is willing to put forward a new name.
The opposition, which controls one house of parliament, flexed its muscles
last week to vote down the government's pick of Toshiro Muto, currently the
number two at the Bank of Japan.
The opposition argued that Muto, a former heavyweight in the finance
ministry, was too close to the government to ensure the central bank's
independence.
But Yukio Hatoyama, secretary general of the main opposition Democratic
Party of Japan, said his side would not reject a different candidate just
because the person used to serve in the finance ministry.
Asked specifically about potential candidates Haruhiko Kuroda, now head of
the Manila-based Asian Development Bank, and former vice finance minister
Hiroshi Watanabe, Hatoyama said: "They are certainly knowledgeable about
international monetary policy."
"Our argument isn't that no one from the finance ministry should take the
post," Hatoyama said in an interview on TV Asahi.
"We are saying that a person who is so identified with opposing the Bank of
Japan's independence is not suitable," he said.
The government has repeatedly pressed the Bank of Japan not to raise
interest rates, which at 0.5 percent are the lowest among the world's major
economies, a legacy of years of efforts to end growth-sapping deflation.
Some market players have voiced concern as the impasse comes at a time when
the world's central banks are coordinating action to contain the fallout of a
weakening US economy.
A US recession is expected to hit Japan particularly hard as its economic
growth is driven by exports. Last week the yen rose to a 12-year high against
the dollar, alarming exporters whose products benefit from a weak yen.
Prime Minister Yasuo Fukuda's government has said it hopes to avoid a vacuum
when Bank of Japan governor Toshihiko Fukui's five-year term ends Wednesday.
Kaoru Yosano, a senior lawmaker in the ruling Liberal Democratic Party, gave
the strongest hint yet that the government would pick a new candidate.
Yosano said the government should not submit the same candidates as the
governor and deputy governors of the Bank of Japan "unless the situation
radically changes."
"I don't think under parliamentary rules it would be appropriate to submit
the same list of people after the upper house already rejected them," he told
public broadcaster NHK. "It would get too chaotic."
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