Japan’s biggest opposition party said it will reject Prime Minister Yoshihiko Noda’s central bank nominee as lawmakers press for a more aggressive monetary policy to spur growth and end deflation.
Liberal Democratic Party officials agreed yesterday to oppose BNP Paribas SA economist Ryutaro Kono joining the policy board, said Fumio Kishida, head of the party’s Diet affairs committee. LDP lawmaker Tsuruho Yousuke today said the nomination will be voted on tomorrow in the upper house, where Noda’s Democratic Party of Japan lacks a majority.
Lawmakers’ complaints, forecasts for a stronger yen and pessimism among large manufacturers may add pressure on the Bank of Japan to loosen monetary policy further this month. Governor Masaaki Shirakawa and his officials have pledged “powerful easing” until 1 percent inflation is in sight after increasing asset purchases by 10 trillion yen ($122 billion) on Feb. 14.
“It looks very difficult for the nomination to be passed,” said Yasuhide Yajima, senior economist at NLI Research Institute Ltd. in Tokyo. “The BOJ may feel more pressure to ease this month because of this disagreement.”
Opposition to Kono’s nomination spans smaller parties and some lawmakers within the Noda’s DPJ. Takeshi Miyazaki, a DPJ lawmaker and a leader of the ruling party’s anti-deflation group, said last month that Kono was perceived as someone who is “negative towards monetary easing.”
Kono, ranked the nation’s top economist by Nikkei Veritas, the weekly edition of Japan’s largest business newspaper, wasn’t available to comment after his nomination was announced.
The yen traded at 82.63 against the dollar as of 3:01 p.m. in Tokyo. It has retreated more than 8 percent since reaching a postwar high of 75.35 in October.
The five-year terms of Seiji Nakamura, 69, and Hidetoshi Kamezaki, 68, former executives in the shipping and trading-company industries, conclude today. The next policy meeting is on April 9-10, and the bank doesn’t require all nine board seats to be filled.
“The LDP has chosen a stance of opposing anybody,” said Takuji Okubo, chief Japan economist at Societe Generale SA in Tokyo. “This proposal is dead unless the DPJ can somehow compromise with the LDP.”
Both houses of parliament need to approve appointments, and while the DPJ controls the lower house it lacks a majority in the upper chamber, where the LDP is the largest force. Smaller opposition groups New Komeito and Your Party last week said that they would oppose the appointment.
“The LDP is taking the approach that we disagree with the BOJ nomination,” Kishida told reporters yesterday. “This person’s thinking, his approach to policy and other aspects were taken into consideration.”
The world’s third-largest economy has contracted in three of the past four years and is struggling to recover from last year’s earthquake and tsunami. Closures of nuclear reactors have swelled energy costs, while deflation that has lingered for more than a decade makes it harder to revive growth.
This week, the BOJ’s Tankan survey showed large manufacturers’ confidence failed to improve in March from the previous quarter and executives see the Japanese currency averaging 78.14 per dollar this fiscal year, a gain that would make exports less competitive. Akio Toyoda, the president of Toyota Motor Corp., said last month that an “appropriate level” is 95 to 100.
Kono said last month that BOJ policy alone cannot solve structural problems in the economy and warned of risks associated with “aggressive monetary policy” in a country with a ballooning public debt.
His comments echo the views of Shirakawa, who has warned that monetary policy cannot solve all of Japan’s woes and financing public debt would damage the economy over time.
The Bank of Japan has kept its main interest rate below 1 percent since the mid-1990s. Lawmakers have called on the central bank to double the 1 percent inflation goal set in February and increase bond purchases, measures that helped to weaken a currency that hit a postwar high of 75.35 in October.
“LDP opposition will make the nomination very difficult,” said Koji Ochiai, Tokyo-based chief market economist at Mizuho Investors Securities Co., a primary dealer. “Politicians are keen to see more BOJ actions as the February decision proved they can make a difference.”
The BOJ nomination is not the only challenge Noda faces. His approval ratings have fallen by half since September, when he became Japan’s sixth leader in five years. His plan to double the nation’s consumption tax to 10 percent by October 2015 is opposed by some members in his own party as well as the LDP, which has called for early elections before it considers the legislation.