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Shirakawa Pledges Japan Easing Amid Political Pressure

Bank of Japan  Governor Masaaki Shirakawa
Bank of Japan Governor Masaaki Shirakawa. Photographer: Haruyoshi Yamaguchi/Bloomberg

Bank of Japan Governor Masaaki Shirakawa pledged to continue to add monetary stimulus amid growing calls from politicians for the central bank to do more to end deflation.

“The BOJ will pursue powerful easing” to help overcome deflation and put the economy on a sustainable growth path, Shirakawa said at a branch manager meeting in Tokyo today, reaffirming the stance. Stimulus measures announced Feb. 14 drove down the yen, aiding exporters.

Ruling party lawmaker Tsutomu Okubo said yesterday further stimulus by the BOJ would weaken the yen more effectively than currency intervention, an indication politicians will continue to press the central bank to expand its asset purchases. The BOJ refrained from easing policy at the meeting on April 10, fueling calls from DPJ lawmakers including Takeshi Miyazaki for them to take “bold and large-scale” action later this month.

“It’s obvious that the central bank’s policies have more influence over the currency than intervention,” Okubo, a Democratic Party of Japan lawmaker, said in an interview in Tokyo yesterday, citing the yen’s depreciation of more than 4 percent against the dollar since the BOJ’s February decision.

The yen traded at 80.96 per dollar as of 2:57 p.m. in Tokyo.

The upper house of the Diet last week rejected Ryutaro Kono’s nomination to the BOJ board, with some lawmakers saying they saw the BNP Paribas SA economist as insufficiently committed to easing.

Sense of Crisis

Kono said yesterday that large purchases of bonds by the BOJ have the potential to affect financial stability. He had “a strong sense of crisis” over the increasing number of people who want to revise the BOJ law, as central bank independence prevented “the lure of monetization,'' Kono said at a BNP Paribas event in Tokyo.

There are currently two vacancies on the central bank’s nine member board and Shirakawa is one of three board members whose term will expire early next year.

Former Bank of Japan deputy governors Toshiro Muto and Kazumasa Iwata are being talked about as possible candidates for the central bank’s top job, Nomura Securities Co. said in a note today. Muto worked at the Finance Ministry for 37 years and is chairman of the Daiwa Institute of Research, while Iwata is president of the Japan Center for Economic Research, a think-tank in Tokyo.

“The two men are also regarded as being more open to easing action than Mr. Shirakawa,” Takahide Kiuchi, chief economist at Nomura said. Nomura did not speculate on possible nominees for the two vacant board seats.

Quantitative Easing

Both Muto and Iwata were on the central bank board when it was pursuing quantitative easing by flooding the economy with cash while keeping the key interest rate near zero. The two weren’t made available to comment when contacted by Bloomberg News today.

Muto, whose nomination to head the bank in 2008 was rejected by lawmakers, said in a February interview that it was appropriate for the central bank to increase its purchases of government debt. Iwata, who has also sat on government panels on national strategy, said in a January interview that the government should allow the BOJ to create a 50 trillion yen ($618 billion) fund to buy foreign bonds to combat the yen’s gains.

“It’s appropriate for the BOJ to increase its buying of government bonds,” Muto said in the interview. If there isn’t an improvement in the economy and financial markets going forward, “the BOJ may have to shoulder a big burden depending on those developments.”

Australia Payrolls

Elsewhere, payrolls in Australia rose more than economists forecast in March, climbing by 44,000, a statistics bureau report showed in Sydney today, almost seven times the median estimate of a 6,500 increase in a Bloomberg News survey of 24 economists. South Korea’s workforce increased last month, pushing the unemployment rate for March down to 3.4 percent.

In France, consumer prices probably rose 2.1 percent in March from a year earlier, according to an economist survey, and industrial production in India probably advanced 6.7 percent in February from a year earlier. Producer prices in the U.S. climbed 0.3 percent in March after increasing 0.4 percent the previous month, analysts surveyed said.

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