* BOJ governor nominee promises lawmakers swift action
* Backs expectations for policy action at April meeting
* BOJ board member Ishida calls for caution
* Japan reports big drop in core machinery orders
By Stanley White and Tetsushi Kajimoto
TOKYO, March 11 The Japan government's choice to
lead the country's central bank promised on Monday to move
quickly to implement fresh monetary stimulus to lift the
struggling economy, a case underlined by a surprisingly sharp
drop in a gauge of capital investment.
However, Haruhiko Kuroda's declaration that "speed is
important" appeared to run into resistance from Bank of Japan
board member Koji Ishida, who in separate comments voiced
caution against taking unorthodox steps too hastily.
The divergence of opinion highlights that while the
nine-member board generally agree on the need for further
stimulus, there are differing views on how best to revive an
economy that has struggled for consistent growth for years.
"I want to debate policy steps with the monetary policy
committee and implement these steps as soon as possible," Kuroda
told lawmakers in a one-day upper house confirmation hearing.
He said he would do what ever it takes to hit the Bank of
Japan's inflation target of 2 percent. The economy has rarely
seen that level of inflation since the early 1990s.
Kuroda is expected to be approved by parliament later this
week because opposition parties, whose support is needed in the
upper house, have indicated they would back him.
Supporters of the more aggressive monetary policy advocated
by Prime Minister Shinzo Abe can point to a 13.1 percent drop in
core machinery orders in January from December as highlighting
the need for urgent action.
Analysts and government officials suggested the much weaker
than expected figures released on Monday were a blip in a
typically volatile data series, but they did show companies
remained cautious in their spending plans. Analysts had expected
a fall of just 2 percent.
Japan has been in deflation for most of the past two decades
and figures last week showed that the economy edged out of its
fourth recession since 2000 in the last quarter of 2012.
Critical of the BOJ's gradual easing steps under outgoing
chief Masaaki Shirakawa, Abe last month nominated Kuroda to
replace him. Kuroda has advocated bolder and swifter action such
as buying more risk assets and more longer-dated government
debt, points he repeated to the upper house.
"We're in an environment where there is limited room to
lower interest rates further," Kuroda said. "That's why it is
important to try to influence market expectations."
If approved by parliament, Kuroda would step down next week
as president of the Manila-based Asian Development Bank and take
over the BOJ after Shirakawa's term ends on March 19. The BOJ's
next policy meeting is due on April 3-4, with financial markets
"The next BOJ meeting under Mr Kuroda will ease monetary
policy, which probably should be an aggressive one," said Akito
Fukunaga, chief rates strategist at Royal Bank of Scotland in
Despite Kuroda's sense of urgency, the BOJ board has
expressed a variety of views on how to move beyond its current
policy of buying assets or making loans totalling 101 trillion
yen ($1.07 trillion) by the end of 2013. That includes buying
government bonds with maturities of up to three years.
In contrast to Kuroda's wish to move quickly, Ishida voiced
caution, saying major changes to the current policy should only
be considered after a thorough review.
"Changing this would be a big shift in its policy framework
and would require a comprehensive examination of the purpose,
means, costs and effects as well as the transmission channel of
monetary policy," said Ishida, considered a moderate member of
the board and who has voted with the majority most of the time.
He was speaking at a news conference after meeting business
leaders in Utsunomiya, north of Tokyo.
Kuroda also said the BOJ should consider starting an open
ended policy of asset buying earlier than 2014, the scheduled
beginning date agreed at a policy review in January.
A similar proposal by board member Sayuri Shirai at the
central bank's policy review last week was turned down by eight
votes to one.
The sharp drop in seasonally adjusted core machinery orders
in January followed three months of solid increases. The monthly
decline was the second-biggest drop since 2005 after a fall of
14.8 percent in May last year.
The Cabinet Office said the orders, considered a leading
indicator of corporate capital spending, overall were "showing
signs of moderately picking up."
It blamed the sharp drop on declines in big-ticket items
such as turbines and boilers and forecast they would rise 0.8
percent in the first quarter after a 2 percent increase in the
final quarter of 2012.
"The fall was bigger than expected but I would still say
this is a temporary fall," said Takeshi Minami, chief economist
at Norinchukin Research Institute.
"The yen's weakness helps expectations for exports to pick
up and business sentiment has also been improving," he said.
Abe's prescriptions of monetary and fiscal stimulus, dubbed
Abenomics, have so far helped drive the yen to 3-1/2 year lows
against the dollar, supporting exporters such as Toyota
Japan's financial markets were mostly focused on Monday on
strong U.S. jobs data, which raised hopes for the outlook of the
world's biggest economy.
Abe has also nominated academic Kikuo Iwata, who supports
unconventional monetary policy, and BOJ official Hiroshi Nakaso
as deputy governors. Their upper house confirmation hearings are
The nominations must be approved by both houses of
parliament. Abe's ruling camp controls the lower house but lacks
a majority in the upper house.