BOJ Tensions May Flare as Noda Seeks to Fill Board Vacancies

Prime Minister Yoshihiko Noda will resume efforts to fill two vacant seats on the Bank of Japan board, two months after lawmakers blocked the appointment of BNP Paribas SA economist Ryutaro Kono.

Noda aims to nominate candidates during the current parliamentary session, ending June 21, Chief Cabinet Secretary Osamu Fujimura told reporters today in Tokyo.

Some lawmakers in the ruling and opposition parties are urging the central bank to take a more aggressive approach to monetary easing to boost growth and tame decade-long deflation. The appointment process will give them a platform for airing their concerns, adding to pressure on Governor Masaaki Shirakawa to take bolder steps.

“We really don’t know if the process of nominations will go through smoothly after the failure in April,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former central bank official. “As long as Japan’s economy is surrounded by myriad uncertainties, political pressure on the BOJ will remain high.”

The positions have been vacant since April 4, when the terms of the previous members expired. The board has nine seats, including the governor and two deputy governors.

After his rejection, Kono said that some politicians were pushing economic policies “entirely divorced from reality” and making “unrealistic” demands on monetary policy.

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