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BOJ Board Openings Give Noda Chance to Shape Stimulus

Yoshihiko Noda, Japan's prime minister. Photographer: Haruyoshi Yamaguchi/Bloomberg
Yoshihiko Noda, Japan's prime minister. Photographer: Haruyoshi Yamaguchi/Bloomberg

March 2 (Bloomberg) -- Japan’s government will make two appointments to the central bank’s nine-member board in coming weeks, giving the administration scope to affect monetary policymaking as politicians press for greater stimulus.

A group of lawmakers yesterday told ruling-party policy chief Seiji Maehara the replacements should favor doubling the Bank of Japan’s inflation target and stepping up asset purchases. The five-year terms of board members Seiji Nakamura, 69, and Hidetoshi Kamezaki, 68, former executives in the shipping and trading-company industries, conclude April 4.

The picks may offer clues of Prime Minister Yoshihiko Noda’s intentions when BOJ Governor Masaaki Shirakawa’s term ends next year, and color policy discussions as the economy pulls out of its 2011 contraction. One hint would be any break from the practice of appointing members with similar backgrounds to those retiring, said economist Hiromichi Shirakawa.

“If they break tradition, or choose people clearly enthusiastic about beating deflation, that will make an impact on markets because it indicates more easing policies in the future,” said Shirakawa, who is chief Japan economist at Credit Suisse Group AG in Tokyo, used to work at the BOJ, and is no relation to the governor. “Politicians want some achievement before next year’s election,” he said, referring to a vote for the lower house of parliament due next year.

Surprise Move

The shift on the board follows the BOJ’s surprise decision on Feb. 14 to boost its asset purchases by 10 trillion yen ($123 billion), a move that confounded the forecasts of 12 of 13 economists surveyed by Bloomberg. The step set off the biggest monthly slide in the yen against the dollar since December 2009. The currency was at 81.26 at 10:21 a.m. in Tokyo.

A group of lawmakers within the ruling Democratic Party of Japan said yesterday in Tokyo that the new BOJ members should favor increasing the inflation goal, set only last month, to more than 2 percent from the current 1 percent, a shift that would mirror the stance of the U.S. Federal Reserve.

They also called for further monetary easing at the March 12-13 policy board meeting, with lawmaker Sumio Mabuchi saying that acting two months in a row would be “epoch-making” and signal the BOJ is as committed to inflation targets as central banks in other nations.

The selection of candidates for the BOJ seats also brings focus to Maehara, 49, who ran against Noda for the party leadership last year and said in an interview in June that the central bank “can expand its balance sheet a little more.”

Falling Prices

Lawmakers have criticized Shirakawa and the BOJ for falling short in efforts to counter more than a decade of deflation, rein in the yen, and drive a recovery from the earthquake and tsunami that devastated the nation’s northeast last year.

“The government will want the new members to be people who will support more easing measures and believe that pumping cash into the economy can determine the trend for prices,” said Jun Ishii, chief fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “The Japanese people have a great interest in ending deflation and the politicians know that an election year is coming up.”

Noda’s approval ratings plunged to 26.4 percent last month, falling below one third for the first time since he took office in September, the Sankei Newspaper reported on Feb. 14.

The yen’s rise to a post-World War II record against the dollar in October contributed to Japan’s economy contracting for a third year in four by making exports less competitive and paring manufacturers’ earnings. Last month, Sony Corp. more than doubled its annual loss forecast.

Signs of Revival

Now, there are signs of a revival, with retail sales and industrial production exceeding estimates in January and the yen weaker since the added BOJ asset purchases.

Gross domestic product probably shrank less than initially estimated, with economists surveyed by Bloomberg News forecasting that fourth-quarter GDP contracted 0.6 percent compared to an earlier reading for a 2.3 percent drop. The unemployment rate rose to 4.6 percent in January, a report showed today. Consumer prices excluding fresh food fell 0.1 percent from the same month a year earlier, the government said, showing that Japan has still not escaped from deflation.

Exiting board member Kamezaki said this week that easing wasn’t the only cause of the currency’s decline, also citing a trade deficit swelled by energy imports after nuclear-plant closures.

New Members

Of the nine members of the BOJ board, two are career central bankers, four are former corporate executives and three are academics. Traditionally new board members are chosen from the same background as their predecessor, but that may not happen this time, according to Shirakawa, of Credit Suisse.

“It’s easier for the BOJ to tame someone who isn’t an expert in monetary policy but the government may want a member who has a background in banking or academia to shake up the board,” Shirakawa said. “The political pressure on the Bank of Japan will continue” even after the the bank expanded easing, he said.

Noda has called for “bold” action to end deflation, and Credit Suisse and Fujitsu Research Institute say political pressure was key in the extra bond purchases and inflation target last month. Shirakawa, the central bank governor, has rejected such claims.

Monetary board members are appointed by the Cabinet and must be approved by both houses of the Diet.

To contact the reporters on this story: Toru Fujioka in Tokyo at; Andy Sharp in Tokyo at

To contact the editor responsible for this story: Paul Panckhurst at

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