April 21, 2015 / 4:16 AM / 4 years ago

Japan's Abe picks Toyota adviser to tip BOJ board in favor of stimulus

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe nominated a former Toyota Motor Corp (7203.T) executive to join the Bank of Japan’s split policymaking board, shifting the balance in favor of Governor Haruhiko Kuroda’s radical stimulus approach.

Toyota Motor Corp. Executive Vice President Yukitoshi Funo poses for a picture before the Reuters Rebuilding Japan Summit in Tokyo June 22, 2011 file photo. REUTERS/Toru Hanai/Files

Yukitoshi Funo, a 68-year-old adviser to the auto giant, would replace Yoshihisa Morimoto, a former utility executive who voted against last October’s surprise monetary easing, when his five-year term expires at the end of June.

While little is known of Funo’s view on monetary policy, he told Reuters a yen at 80 or above against the dollar was too high back in 2011, when sharp rises in the yen were hurting an economy struck by a devastating earthquake and tsunami.

His background as a sales executive at Toyota, which yields strong influence on the government’s exchange-rate policy and backs Abe, may mean Funo will support any future proposals by Kuroda to expand an already massive stimulus, some analysts say.

“Given his background, Funo could be sensitive to moves in the yen and overseas markets. He may be supportive of further easing if a strengthening of the yen pressures the BOJ to act,” said Yasunari Ueno, chief market economist at Mizuho Securities.

Having Funo on the board would ease pressure on Kuroda, who faced a razor-thin 5-4 vote last October, when he pushed through a decision to expand the monetary stimulus after having failed to convince skeptics, including Morimoto.

Just weeks ago, Yukata Harada, an academic known for his reflationist views, joined the board, which has been split between Kuroda and his two deputies, who are adamant about meeting inflation targets, and other members, who are cautious of acting again just to accelerate inflation.

Analysts say the changes in the board’s composition will give Kuroda enough votes to more comfortably approve further monetary easing from July onward.

ABE’S INFLUENCE SEEN

The government followed the usual practice of naming a business executive to replace a board member who came from business circles.

However, it was the first time a person has been nominated from a manufacturer of consumer goods, surprising some in the BOJ due to a potential conflict of interest given Toyota’s history of lobbying policymakers for steps to weaken the yen.

A fluent English speaker with an MBA from Columbia University, Funo spent more than a decade working at Toyota’s North American operations, overseeing the automaker’s rapid expansion in its most profitable market.

Funo had the trust of President Akio Toyoda while executive vice president at the automaker, where his responsibilities included government and public relations during Toyota’s recall crisis in 2010.

Several names, including another academic who held similar views to Kuroda on reflation, were floated as potential candidates before Funo was eventually chosen, say government sources with knowledge of the matter.

President Toyoda’s close personal ties with Abe suggests the premier’s views had strong influence in the selection process, the sources said.

The nomination must be approved by Diet, though this is a near certainty as Abe’s coalition holds a solid majority in both houses of parliament.

Two years into the BOJ’s radical experiment to revive the economy through massive purchases of government bonds and other assets, inflation has ground to a halt and economic growth remains fragile, casting doubt on the central bank’s strategy to pull the country out of decades of deflation.

The BOJ will issue its semi-annual report on the economic and price forecasts at its next rate review on April 30. If approved by parliament, Funo will join from July, when the bank will conduct a quarterly review of these projections.

Additional reporting by Sumio Ito and Yoshifumi Takemoto; Editing by Chris Gallagher, Kim Coghill, Shri Navaratnam and Simon Cameron-Moore

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