JAPAN: Japan's lower house approves Bank of Japan governor nominee but stalemate remains; markets fall and yen hits record highs
Record ID:
465012
JAPAN: Japan's lower house approves Bank of Japan governor nominee but stalemate remains; markets fall and yen hits record highs
- Title: JAPAN: Japan's lower house approves Bank of Japan governor nominee but stalemate remains; markets fall and yen hits record highs
- Date: 13th March 2008
- Summary: (BN04) TOKYO, JAPAN (FILE) (REUTERS) BANK OF JAPAN BUILDING HEADQUARTERS CAR ENTERING PAST BANK SIGN
- Embargoed: 28th March 2008 12:00
- Keywords:
- Location: Japan
- Country: Japan
- Topics: Finance
- Reuters ID: LVA72RMUO1WPTVAZ8KHJR1L62DEI
- Story Text: Japan's Lower House approves Bank of Japan (BoJ) governor nominee but stalemate remains due to upper house opposition, possibly creating a vacuum during turbulent times for markets. Tokyo stocks fall as yen hit highs.
Japan's government won a parliamentary vote on its nominee for governor of the Bank of Japan (BOJ) on Thursday (March 13) but the result did nothing to clarify who will head the central bank, as its candidate has already been vetoed.
Parliament's lower house, controlled by the governing coalition, approved Toshiro Muto, currently a deputy governor, for the top job, with academic Takatoshi Ito and retired central bank official Masaaki Shirakawa as deputies.
But Muto was rejected by the opposition-dominated upper house on Wednesday (March 12) so Thursday's vote simply confirmed a political stalemate over the central bank's leadership.
Opposition lawmakers have consistently opposed Muto, mainly because of his close ties to the government as a former top bureaucrat in the Ministry of Finance -- a relationship they say would hurt the independence of the central bank.
"Five years ago when Muto was nominated for deputy governor we were against him. So this time the ruling party should have known in advance that we would be against Muto's nomination. What exactly were they thinking?" said Democratic party member, Masaharu Nakagawa, in parliament on Thursday.
The government must now either convince opposition parties to change their minds, or put up a compromise candidate.
"We have the option of re-nominating Muto for the post but of course we also have other options too. Right now all I can say is that Prime Minister Fukuda has yet to make a decision," Cabinet secretary-general Nobutaka Machimura told reporters on Thursday.
Masaaki Shirakawa was approved by the upper house as deputy governor, making it likely he will become acting governor if the row is not resolved by the time current governor Toshihiko Fukui retires next week.
That would ensure there is someone in place to make decisions if a need arose to coordinate global moves to combat the crisis in credit markets.
But analysts say a stopgap governor might be unwilling to take critical, long-term decisions and the issue should be resolved quickly especially with markets fluctuating wildly.
This political deadlock hurt the markets badly on Thursday, with the benchmark Nikkei sliding more than three percent to a new two and half year low as the yen advanced to a 12-year high against the dollar.
Exporters and major banks were battered, with Mizuho Financial Group hitting its lowest close in four years on growing doubts about the Federal Reserve's efforts to aid strained credit markets and limit the damage to the U.S. economy.
In a coordinated effort with other central banks, the Fed plans to expand a lending programme and accept as collateral a broader base of securities, including mortgage bonds whose value has dropped with the bursting of the housing bubble.
Financial market players said that while the tussle over the BOJ governorship was hard to quantify in terms of actual selling, it was certainly damaging Japan's image.
Others said that with the dollar tumbling, such turmoil could hardly come at a worse time.
The Nikkei closed down 3.3 percent at 12,433.44, its lowest since August 31, 2005, after shedding more than 400 points. The broader TOPIX was down 3.1 percent at 1,215.87, also a two and a half year low. Additional volatility came from the fact that Thursday is the the last day before settlement of index futures and options, hence discouraging buyers. - Copyright Holder: FILE REUTERS (CAN SELL)
- Copyright Notice: (c) Copyright Thomson Reuters 2011. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None