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March 7, 2008

Muto named as Japan’s preferred new central bank governor

by Richard Kilner

Story link: Muto named as Japan’s preferred new central bank governor

Toshiro Muto has been officially named as the Japanese government’s selection to become the new governor of the Bank of Japan, succeeding Toshihiko Fukui.

The news comes as the central bank decides today to retain interest rates at 0.5%, the final such decision Fukui will make as governor.

Muto, who formerly worked at the Ministry of Finance, is not certain to acquire the position, however, as the upper house of Japan’s Parliament is controlled by the opposition.

The stage is set for a showdown between government and opposition, with both aware that a delay to selecting a new governor would reflect poorly on the nation’s economic prestige at a time of financial turbulence.

In terms of competence, Muto is broadly accepted as being a safe pair of hands to replace Fukui, whose term ends in just 12 days time. Indeed, Muto is presently deputy governor, and is seen as Fukui’s own choice for a successor.

A prolonged struggle between government and opposition could leave the central bank in the uncomfortable position of having a vacant chair for its governor.

The situation is made more precarious by the Bank of Japan’s relatively recent independence from government, a status that some feel could be imperilled by the promotion of a man who once worked as a bureaucrat in the Ministry of Finance.

Some have cited a preference for another deputy governor, Yutaka Yamaguchi, as a more neutral candidate for the post.

One thing all parties agree upon is the need for a speedy decision.

 

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