Nikkei falls 2.1 pct, hit by news Muto is leading candidate for BOJ chief

Fri Feb 15, 2013 12:19am EST

By Ayai Tomisawa
    TOKYO, Feb 15 (Reuters) - Japan's Nikkei share average
extended losses on Friday afternoon on news that a conservative,
former finance ministry bureaucrat is the leading candidate to
head the central bank.
    Sources close to the matter told Reuters that Japanese Prime
Minister Shinzo Abe is close to selecting his nominee for
governor of the Bank of Japan, and that Toshiro Muto is the
leading candidate for the top job in a honed down list of names.
 
    Muto is seen as a conservative reformer, and thus may be
less likely to embark on more radical policy easing which
markets have been expecting from the BOJ as policymakers try to
reflate the economy.
    The Nikkei was down 2.1 percent at 11,071.73 points
in mid-afternoon trade, compared to the midday close of
11,207.93. The Topix dropped 2.4 percent to 931.77.
    "Muto is considered that he would only follow traditional
ways such as expanding asset purchase programs. It would merely
be an 'enhanced version of the conventional way'," said Norihiro
Fujito, senior investment strategist at Mitsubishi UFJ Morgan
Stanley Securities.
    "Investors see that it would be difficult to meet the
(BOJ's) 2 percent inflation target without drastic easing. We
cannot picture Muto going bold like buying foreign funds which
could accelerate the yen's weakness."
    Other market analysts agreed.
    "It soured the mood, and some started dumping futures
contracts," said Hiroichi Nishi, an assistant general manager at
SMBC Nikko Securities.
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