TOKYO (Reuters) - The head of a small but potentially influential Japanese opposition party said on Wednesday he would not support any move by the government to nominate Toshiro Muto to become the next governor of the Bank of Japan, dealing a blow to a leading candidate’s chances.
Muto, a former deputy governor was cited on Tuesday by an adviser to Prime Minister Shinzo Abe as one example of a good candidate to take over from the current BOJ Governor Masaaki Shirakawa, whose term expires in April.
Yoshimi Watanabe, head of the opposition Your Party, however, told Reuters that he would oppose any nomination of Muto, a former finance ministry official, saying it would smack of “amakudari,” or backroom deals ministries use to ensure that their bureaucrats obtained other influential government jobs.
Watanabe could exert crucial influence over the eventual choice as he shares similar views to Abe on the need for aggressive reflationary monetary policy.
The ruling Liberal Democratic Party (LDP) needs opposition support to approve BOJ nominees in the upper house, where it lacks a majority, making Watanabe’s Your Party a potential partner for cooperation.
Watanabe also said Asian Development Bank head Haruhiko Kuroda, another potential candidate to head the BOJ, probably should be kept in his current position to keep leadership of the ADB with Japan.
The opposition leader said academics Koichi Hamada and Kikuo Iwata were more suitable candidates.
Watanabe reiterated his view that the next BOJ governor should have the academic background, English language skills and experience in financial crisis management required.
“We need three more people on the BOJ board who believe in reflationary policies,” Watanabe said.
“We need someone who is good at not just at management, but at crisis management. There could be a period where yields start to rise as speculators sell government bonds. We cannot rule out another financial crisis.”
Before Shirakawa’s term as governor expires in April, two deputies’ terms expire in March, giving Prime Minister Abe a chance to shift the nine-member BOJ policy board closer to his agenda of bold monetary policy easing to end almost 20 years of nagging deflation.
Watanabe, long a proponent of aggressive monetary easing, said that former economics minister Heizo Takenaka, academic Yoichi Takahashi and former BOJ board member Nobuyuki Nakahara are also suitable candidates to join the central bank.
Watanabe said he presented his list of BOJ candidates to Abe in a meeting earlier this month. The ruling party is trying to consult with opposition parties on the BOJ nominations, the Nikkei reported on Wednesday.
The BOJ said on Tuesday it would switch to an open-ended commitment to buying assets next year and double its inflation target to 2 percent after Abe consistently piled pressure on the central bank to buy more government bonds to lower yields, weaken the yen and kickstart the economy.
The new inflation target and open-ended monetary easing, announced in a joint statement with the BOJ and the government, is not legally binding because it does not revise the law that stipulates the BOJ’s mandate, Watanabe said.
The joint statement said the BOJ will aim to achieve 2 percent inflation as early as possible, but this is too vague to hold the BOJ accountable, Watanabe said.
“We will continue to push for a revision to the BOJ Law to make the BOJ responsible for inflation targeting and job creation,” he said.
“We want to be able to dismiss the BOJ governor if that person does not fulfill their duties. Achieving the price target is part of that duty.”
Watanabe said his party would resubmit an earlier bill to revise the BOJ Law when parliament opens later this month, but the bill will likely lack the support needed to be put up for a vote.
Editing by Simon Cameron-Moore