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Japan Nominates Shirai to BOJ Board, Replacing Biggest Dissenter

Japan’s government nominated Sayuri Shirai, an economics professor, to the Bank of Japan’s policy board, upholding a practice of replacing the sole female board member with another woman.

The decision was made at a committee meeting of lawmakers from both chambers of the Diet, according to a statement released yesterday in Tokyo. If approved by a full parliament, Shirai, a 48-year-old economist who has worked at the International Monetary Fund and published work on Europe’s debt woes, would succeed Miyako Suda, who is completing her second five-year term on March 31.

The loss of Suda, the bank’s biggest opponent of monetary easing, may cause policy discussions to focus more on providing more stimulus to support growth in the world’s third-largest economy. Shirai’s background may enrich BOJ discussions about grappling with debt given her expertise on Europe’s fiscal crisis.

“It would’ve given a negative impression to not have any female members on the board,” said Chotaro Morita, chief strategist at Barclays Capital Japan Ltd. in Tokyo. “We don’t know much about her views on monetary policy, so all we can say for now is Suda’s departure may make the board less hawkish.”

The BOJ has pledged to keep the benchmark interest rate between zero percent and 0.1 percent until the board can expect consumer prices to become stable, which is defined by the board at a median forecast of about 1 percent. Suda, who will attend her final board meeting next week, said in 2006 that her understanding of stable prices is at a “pretty low” range above zero.

‘Distinct Role’

“Suda has played a distinct role on the BOJ board, where most members hardly indicate whether they are hawkish or dovish,” Morita at Barclays said. She dissented at least four times from decisions since joining the bank in 2001, when she replaced Eiko Shinozuka, the bank’s first female board member.

Suda has been the only woman on the board for her entire tenure. By comparison, half of the Federal Reserve’s current six board members are women, including Vice Chairman Janet Yellen. The European Central Bank’s governing council has one woman among its 23 members, while there are none on the nine-man Bank of England Monetary Policy Committee.

Suda has a history of voting against added stimulus. She opposed an expansion of quantitative easing twice under former Governor Toshihiko Fukui and dissented from a decision to buy asset-backed securities in April 2003.

IMF Economist

Shirai, who currently teaches at a Keio University campus outside of Tokyo, earned her doctorate in economics from Columbia University in 1993, where she studied international trade, and has published books on the IMF and Asia’s financial crisis. Her most recent publications include analysis on Europe’s sovereign debt.

“She hasn’t said much about Japan’s monetary policy, so it’s unclear how she’ll influence the policy board,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “Given Europe may fall into further turmoil with its sovereign debt problems, and as someone who’s very knowledgeable about the issue, she would be a great asset to the central bank.”

When the BOJ unveiled a 5 trillion yen asset-buying fund last year, Suda opposed using its money to purchase government bonds, saying the step could cause ”overheating” and “bubbles” in bond markets.

‘Not to Rush’

“It’s hard to imagine anyone would be more hawkish than Suda,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. “Looking at what Shirakawa and his deputies are saying, their stance is not to rush a rate increase. If their opinion becomes more influential, tightening would become very unlikely.”

Oil prices approaching their 2008 peak and elevated commodity costs are spurring inflation worldwide, threatening the global expansion and casting a shadow on a recovery in Japan, where gross domestic product contracted in the fourth quarter. Overseas shipments and factory output grew less than expected in January and companies increased capital spending at a slower pace in the fourth quarter, government reports showed.

“The BOJ may have difficulty judging whether rising oil prices will slow global growth and threaten to drive Japan’s economy back into a slump,” said Naomi Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “If commodity costs keep surging, the bank may have to decide whether additional policy action is necessary.”

Falling Prices

Core consumer prices, which exclude fresh food and are the bank’s preferred gauge of inflation, fell 0.2 percent in January, the slowest drop since 2009.

Core prices, which have slid for 23 consecutive months, will probably resume rising as early as April, said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. The BOJ in January raised its forecasts for consumer prices for the year starting April 1 to 0.3 percent from its previous estimate of 0.1 percent, citing costlier commodities.

Central bank board members are appointed by the Cabinet and their nominations must be approved by the Upper and Lower houses of parliament since the new Bank of Japan Law was enacted in 1998. Of the nine members, two are career central bankers, four are former corporate executives and three are academics.

Tadao Noda, a BOJ board member, last week said sustained gains of commodity prices may erode corporate profits and hurt incomes and jobs. His term expires in June and, like Suda, he advocated raising interest rates in 2007 and opposed injecting more stimulus in March 2010.

BOJ policy makers, who last month raised their assessment of the economy for the first time in nine months, indicated they remain cautious about the economic outlook. Deputy Governor Hirohide Yamaguchi told lawmakers this week that the BOJ “stands ready to take appropriate policy action should the outlook of the economy and prices worsen.”

The bank has offered to lend to commercial lenders through a 30 trillion-yen low-rate credit program and buy assets with a 5 trillion yen fund. BOJ board members have said they are ready to expand the asset-buying fund if more stimulus is needed.

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