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Thursday, Oct. 16, 2008

BOJ hand nominated as deputy

Government says Yamaguchi needs to fill long-vacant post to help deal with global crisis


By MASAMI ITO and KANAKO TAKAHARA
Staff writers

The government nominated Bank of Japan Executive Director Hirohide Yamaguchi on Wednesday to fill the central bank's longtime vacant deputy governor post amid the ongoing global financial crisis.

News photo
Hirohide Yamaguchi

To succeed in appointing Yamaguchi, who is in charge of the BOJ's monetary affairs, the government will need the approval of both chambers of the Diet, including the opposition-controlled Upper House.

Chief Cabinet Secretary Takeo Kawamura said he is hopeful the opposition parties will understand why the 57-year-old Yamaguchi, now in charge of the BOJ's monetary affairs as an executive director, is suited for the deputy governor position.

"Of course, Yamaguchi is the right person for the job, and because he is an insider at the BOJ, I believe the opposition parties will understand that he would strengthen" the central bank's operations, Kawamura said.

He said Prime Minister Taro Aso discussed the matter with BOJ Gov. Masaaki Shirakawa, who recommended Yamaguchi.

"I think Aso wanted to resolve the vacancy issue as soon as possible under the current chaos in the international financial market," Kawamura said. "And Aso consulted Shirakawa because the role of deputy governor is important to support the governor."

How BOJ vacancies developed

Kyodo News

The following events detail the government's struggle to fill executive positions at the Bank of Japan:

March 7 — The government names BOJ Deputy Gov. Toshiro Muto as candidate for next governor. Masaaki Shirakawa, a former BOJ executive director, and Takatoshi Ito, a University of Tokyo professor, are nominated as new deputies.

March 12 — The House of Councilors, where the opposition holds a majority, votes down the nominations of Muto and Ito but approves Shirakawa.

March 13 — The House of Representatives, where the ruling camp has a majority, approves all three nominees. Shirakawa becomes a deputy governor.

March 18 — The government presents more candidates — former Vice Finance Minister Koji Tanami for governor and BOJ Policy Board member Kiyohiko Nishimura for the other deputy governorship.

March 19 — BOJ Gov. Toshihiko Fukui, Muto and another deputy, Kazumasa Iwata, end their five-year stints. Candidates Tanami and Nishimura win acceptance from the Lower House, but Tanami is rejected by the Upper House.

March 20 — Shirakawa and Nishimura start their deputy governorships.

April 7 — The government nominates Shirakawa for governor and proposes that Hiroshi Watanabe, a former vice finance minister for international affairs, succeed him as deputy governor.

April 9 — Shirakawa becomes BOJ governor after Diet approval. Watanabe is approved by the Lower House but rejected by the Upper House.

May 29 — The government nominates Kazuhito Ikeo, a Keio University professor, to succeed Nishimura on the Policy Board.

June 12 — The Lower House endorses Ikeo.

June 23 — The government withdraws from its plan to press for Ikeo after getting advance warning that he will be rejected in the Upper House vote.

Oct. 15 — The government nominates BOJ Executive Director Hirohide Yamaguchi for deputy governor.

Kenji Yamaoka, the Diet affairs chief of the Democratic Party of Japan, the largest opposition party, said he didn't foresee any problems over Yamaguchi's appointment.

"In general, Yamaguchi has made achievements as the current BOJ executive director," Yamaoka said. "I don't believe there will be any objection from within the DPJ."

Yamaguchi is expected to be questioned on his policies in both the Upper and Lower houses, and his appointment is expected to be approved by early next week.

The Liberal Democratic Party-New Komeito ruling bloc has faced difficulty appointing the BOJ governor and two deputies due to the divided Diet.

The DPJ has repeatedly opposed nominating someone from the Finance Ministry, arguing the candidate needs to ensure the independence of the monetary policy body. In spite of this, the government of former Prime Minister Yasuo Fukuda nominated several candidates from the Finance Ministry, resulting in the long-term vacancy in one of the deputy posts.

"The ruling block previously had a habit of getting its own way," Yamaoka said. "We had notified (the ruling bloc) in advance that we wouldn't be able to approve the candidates (from the Finance Ministry) and still it nominated them — that was a bit unthinkable."

After a series of rejections, Shirakawa was approved by the DPJ after being bumped up from the deputy governor post in early April.

Earlier in March, Kiyohiko Nishimura, a former University of Tokyo professor and BOJ Policy Board member, was appointed deputy BOJ governor. But the second deputy post has remained vacant.

Economists see Yamaguchi as a safe pick within the government's limited options.

"The DPJ did not want a candidate from the Finance Ministry or someone who wants to ease monetary policy," said Hiromichi Shirakawa, chief economist at Credit Suisse in Tokyo. "So the selection was effectively limited to someone from the BOJ."

He said the government probably liked Yamaguchi's ability to coordinate policies with the state and the ruling parties, a role a deputy governor needs to play.

"The mission of BOJ governor is to exchange opinions with other central bank chiefs, while the mission of deputy governors is to coordinate policies at home," he said. "It would be very difficult if the BOJ has to leave that post vacant."

Yasuhide Yajima, senior economist at NLI Research Institute, welcomed the choice because Yamaguchi is familiar with the central bank's discussions over the past several months and is well versed in international financial affairs.

The government wanted to pick "someone who can start discussions from day one," Yajima said. "It will mean continuation of policy and a sense of confidence."

Amid the global financial crisis, the BOJ has held numerous emergency Policy Board meetings over the past month to increase liquidity in the money market, including giving the green light to a dollar-swap agreement with the U.S. Federal Reserve.

However, because Yamaguchi is from the BOJ, his opinions could be similar to those of Gov. Shirakawa, who has said the current interest rate is too low.



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