Japan lawmakers leave central bank leaderless
By Hideyuki Sano
TOKYO (Reuters) – The Japanese central bank will be run by a temporary leader in the midst of a credit crisis, after parliament rejected on Wednesday the government’s latest nominee to replace the current governor when he retires in a few hours.
Opposition parties in control of parliament’s upper house vetoed a second former top finance ministry bureaucrat put forward for the job, leaving Governor Toshihiko Fukui with a final task of appointing a temporary governor before he leaves the job at midnight (1500 GMT).
The vacancy — the first at the Bank of Japan since 1923 — leaves the world’s No.2 economy without a permanent central bank head amid global market turmoil and as major central banks take coordinated action to curb the credit crisis.
While politicians from the ruling Liberal Democratic Party and the opposition Democrats have repeatedly blamed each other for the stalemate, one analyst questioned the future of Prime Minister Yasuo Fukuda.
“Fukuda has now twice in a row put forth someone with experience at the Ministry of Finance, which the Democrats don’t like. This has raised questions about Fukuda’s sense,” said Takehiro Sato, an economist at Morgan Stanley, adding that Fukuda may not last until mid-year.
“The first time, the criticism focused on the Democrats, but this time the criticism toward Fukuda and the ruling party is growing. The collective power of the Fukuda administration within the LDP and the ruling party is weakening dramatically.”
RATE CUT IN APRIL?
Economists noted that the acting governor, most likely to be Deputy Governor Masaaki Shirakawa, would be in charge at the central bank for now and Goldman Sachs said it expected a rate cut next month even if a permanent leader was not put in place.
“The turbulence surrounding the new governor and deputy governors need not be a major impediment to an emergency rate cut or April easing,” the investment bank said in a research note.
Japanese interest rates, at 0.5 percent, are already near rock bottom, but Goldman said it looked as if the country had been in recession since the last quarter of 2007 with U.S. economic weakness and abrupt rises in the yen seen as adding impetus for a rate cut.
The political deadlock comes in the middle of coordinated central bank action, deep rate cuts by the U.S. Federal Reserve and gyrating currency, bond and share markets, and has raised concerns that Japan might be unable to act swiftly on monetary policy if needed.
Both Tanami, the nominee rejected on Wednesday, and Toshiro Muto, the nominee who opposition parties rejected last week, were once vice ministers at the finance ministry.
“We said from the beginning that the BOJ personnel should not be an object of political feuding and that a vacuum should not be created. The government’s clumsy handling is to blame for the result today,” said Kenji Yamaoka, a senior Democratic Party lawmaker.
Political analysts said they were stunned that Prime Minister Yasuo Fukuda, having seen one former top finance ministry official vetoed in parliament’s opposition-controlled upper house, then nominated someone with nearly the same credentials.
Japanese media were just as scathing about the political paralysis in a parliament split between an overwhelming majority for the ruling coalition in the lower house, with opposition parties in control of the upper house.
“The lack of policies of Prime Minister Fukuda and the irresponsibility of Democratic Party leader (Ichiro) Ozawa have given birth to an outrageous, directionless drama in which the people are ignored,” the Nikkei business daily said in an editorial.
“The loss of confidence in Japan among the international community will be immeasurable. And the Fukuda administration will suffer a big blow,” it said.
TWO DEPUTIES, NO SHERIFF
Parliament last week approved Shirakawa as deputy governor, and on Wednesday it approved a second deputy governor — current BOJ board member Kiyohiko Nishimura.
Underlying the succession crisis is a rapidly weakening U.S. economy, which prompted the Fed to slash interest rates by 0.75 percentage point on Tuesday, with Wall Street expecting more to come. ID:nN17621242
Conditions are also worsening in Japan, where the Reuters Tankan, a monthly survey of business sentiment, on Wednesday hit a four-year low among manufacturers. ID:nT289209
“As some in the market doubt if the BOJ could take such swift action if its top post is left vacant, a new governor must be decided as soon as possible in view of uncertainties over the economic outlook,” said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Securities.
The big Fed rate cut sent the dollar soaring to its biggest one-day rise against the yen in nine years, taking it back toward 100 yen from a 13-year low below 96 yen seen on Monday. FXNEWS
Japanese stocks .N225 jumped 2.4 percent after the Fed cut