Japan to nominate Shirakawa as permanent BOJ chief

(For more on the BOJ succession, click [ID:nT55777])

By Yoko Nishikawa

TOKYO, April 7 (Reuters) - The Japanese government is likely to nominate acting BOJ Governor Masaaki Shirakawa on Monday to take the helm of the central bank permanently, after the main opposition party signalled support for the idea.

But opposition from Ichiro Ozawa, the leader of the main opposition Democratic Party, to a government plan to nominate a former finance ministry bureaucrat for deputy governor has prompted speculation that Prime Minister Yasuo Fukuda may postpone the submission of one or both nominees.

A political deadlock due to opposition control of the upper house of parliament has led to the first vacancy at the top of the Bank of Japan (BOJ) in 80 years after former governor Toshihiko Fukui retired almost three weeks ago.

That gap in the midst of a global credit crisis has embarrassed the government, which wants the vacancy filled in time for a permanent governor to fly to Washington for a G7 meeting on Friday that will focus on gyrating global markets and concern about a U.S. recession.

Opposition parties, which can veto nominees to head the central bank in the upper house, have rejected the government's two previous nominees on grounds that their careers in the finance ministry would threaten the BOJ's independence in monetary policy.

The showdown reflected the broader political impasse that is undermining confidence in Fukuda, who is already suffering public doubts about his leadership that have cut his support rates to 24 percent, a public poll by the Mainichi newspaper showed.

The government plans to submit its nominee for the BOJ chief to a parliamentary committee from 12:40 p.m. (0340 GMT). If it does, the parliament is expected to hold hearings on the nominees before a parliamentary vote on Wednesday.

The row comes as the BOJ's policy setting board meets on Tuesday and Wednesday, in which it is widely expected to keep interest rates unchanged at 0.5 percent but debate whether to downgrade its outlook for the Japanese economy. [ID:nT115089]

Shirakawa, confirmed as deputy governor last month, will chair the meeting as acting head of the central bank.

Financial markets, fed up with the political wrangling over the BOJ chief, are more focused on the faltering U.S. economy, especially after data showed last week that U.S. payrolls fell for the third straight month. [FRX/] [.T] [JP/]

Political sources said on Friday that the government raised the prospect of keeping Shirakawa in the job permanently in informal talks with the main opposition Democratic Party.

Hiroshi Watanabe, a former vice finance minister for international affairs, was suggested as a possible candidate for a new deputy governor in informal discussions, the sources said.

The Democratic Party opposes the the custom of alternating top BOJ posts between central bankers and finance ministry bureaucrats, an example of the practice of "amakudari", or "descent from heaven", whereby bureaucrats parachute into cushy jobs after retiring.

Ozawa said on Sunday the problem of amakudari did not apply to Shirakawa, a career central banker.

But, asked whether Watanabe could replace Shirakawa as deputy governor, he said: "The opinion that it is not desirable for this post to take the form of amakudari is held by many in the party."

Ozawa's colleague, Yukio Hatoyama, secretary-general of the party, has previously supported Watanabe for a BOJ job given his expertise to tackle international monetary and financial issues.

But Japanese media reported on Monday that Ozawa's apparent opposition to Watanabe could turn party against the idea of accepting him as a deputy governor, pointing to the possibility of a delay in the government's nomination. (Editing by Rodney Joyce)