TOKYO Feb 20 Prime Minister Shinzo Abe is keen
to avoid a rerun of the debacle in 2008 when the seat for the
Bank of Japan governor was left open for weeks, so he is
carefully calculating the odds that potential candidates will
win vital opposition support.
Those political dynamics could complicate prospects for
leading candidate Toshiro Muto, a former top finance ministry
official who was rejected for the job five years ago when the
opposition Democratic Party of Japan (DPJ) nixed his
appointment. Unlike in 2008, the DPJ is not flatly ruling out
ex-bureaucrats now, but doubts remain about its stance.
Political insiders, who declined to be identified due to the
sensitivity of the topic, say support of the DPJ or other
smaller opposition parties is key in deciding who gets the job.
Abe's ruling Liberal Democratic Party (LDP) and its smaller
partner lack a majority in parliament's upper house, which must
approve of the government's nominee.
"The over-riding point is that the nomination goes smoothly
with as little controversy as possible in parliament," said
Jesper Koll, director of equity research at JP Morgan in Tokyo.
Abe has vowed to end the deflation that has plagued Japan's
economy for decades and has made it clear he wants aggressive
monetary policy action from the replacement for Masaaki
Shirakawa, who steps down with two deputies on March 19.
So far Abe, who staged a rare come-back as premier when the
LDP surged back to power in December, has won high support rates
from voters for his take-charge image, but must keep up the
momentum ahead of an election for the upper house in July.
"They have a 10-out-of-10 so far in terms of proposals being
implemented. The supplementary budget was implemented and the
BOJ set a 2 percent inflation target in record time," Koll said.
LAY THE GROUNDWORK
Economics Minister Akira Amari said on Tuesday that Abe
would "lay the ground work" for agreement with the opposition
after the returning from a Feb. 21-24 trip to the United States,
where he will explain his "Abenomics" recipe for big spending
and hyper-easy monetary policies to President Barack Obama.
Abe's government has said it wants to decide on the nominees
by the end of February.
An agreement between the main parties on Tuesday to scrap a
rule that any nominee whose name was leaked to the media was
automatically disqualified makes it easier to hold unofficial
talks with opposition parties, political sources said.
The Democrats, the biggest opposition bloc when the BOJ
governor's term expired in 2008, refused then to approve
government candidates such as Muto who were former finance
ministry officials, arguing it could compromise the central
bank's independence. That lead to a gap of several weeks before
an appointment could be made to fill the vacancy.
While the LDP and its partner hold a two-thirds majority in
parliament's lower house, they have only 102 seats in the
242-member upper chamber, where six seats are currently vacant.
The two-thirds majority in the lower house can over-ride the
upper chamber to pass laws, but not on personnel matters.
Winning the backing of the Democrats, who have 87 upper
house seats, would clearly be the easiest strategy.
Otherwise, the LDP would need to cultivate small parties
such as Your Party, which has ruled out ex-bureaucrats and wants
the governor to be a fluent English speaker - which Muto is not.
"The question is whether Abe's nominees can win opposition
support. If the Democrats agree, it is simple. If not, Your
Party will hold the key," said Tomoaki Iwai, a political science
professor at Nihon University.
"The Democrats are not saying they are opposed to former
bureaucrats. But last time they rejected Muto, so the question
is, could they agree this time?" Iwai added.
The Democrats say they learned the risks of playing games
with important appointments from their 2009-2012 stint in power.
But whether party executives can bring their battered but
still fractious party together following December's resounding
election defeat is unclear.
"There would be debate (inside the party) about Mr. Muto
since we voted against him 5 years ago," DPJ lawmaker Keisuke
Tsumura, a former BOJ official, told Reuters.
"There has been no conclusion yet. But we have decided to
focus on the individual, the environment has changed and he has
had private-sector experience," Tsumura said, adding both Muto
and another potential candidate, ex-government economist
Kazumasa Iwata, were well aware of the limits of monetary policy
as implemented to date.
Muto, currently the chairman of private think tank the Daiwa
Institute of Research, is a favourite of Finance Minister Taro
Aso, who wants the top BOJ job to go to someone with a proven
ability to run a big organisation.
Muto was formerly the top bureaucrat in the finance ministry
and a former deputy governor of the BOJ.
His appointment as BOJ chief this time would signal bolder
steps to reflate the economy than Shirakawa, but less radical
measures than advocated by candidates such as Iwata, who was
deputy BOJ governor alongside Muto.
Iwata has called for the BOJ to consider buying foreign
bonds to curb yen strength, a proposal Abe had echoed but which
Aso shot down on Tuesday and which the prime minister himself
toned down on Wednesday.
While some interpreted the foreign bond-buying fuss as a
sign of friction over the BOJ nominee, others said Aso's stance
reflected the reality that such a move would spark criticism
from abroad, where concerns persist that Japan is trying to
weaken the yen so it can export its way out of recession.
"There is a clear G7-G20 statement that makes it practically
impossible for Japan to be super bold," Koll said. "It's not
because of Aso, it's because of the global agreement and Japan
is not going to break ranks."
Abe's list includes Asian Development Bank head Haruhiko
Kuroda, Japan's former currency tsar, who favours an aggressive
two-year timeframe to meet the 2 percent inflation target.