Asian Development Bank President Haruhiko Kuroda is set for parliamentary confirmation as Japan’s next central bank chief following his nomination, ushering in a leadership team projected to step up monetary stimulus.
Members of the main opposition Democratic Party of Japan said they will back Kuroda, easing his passage through a split parliament. Prime Minister Shinzo Abe will present his nominees for Bank of Japan governor and two deputies tomorrow morning, ruling Liberal Democratic Party lawmaker Genichiro Sata said.
While the DPJ signaled resistance to one anticipated deputy pick -- Kikuo Iwata, an advocate of greater government oversight of the BOJ -- two other opposition parties showed support, increasing the chance that Abe gets approval for his full slate. Confirmations would yield him a win on his biggest agenda item since he took office in December vowing to lift Japan out of 15 years of deflation.
“I’m expecting smooth sailing,” Robert Feldman, head of Japan economic research at Morgan Stanley MUFG Securities Co., said in a Bloomberg Television interview. “The new leadership of the Bank of Japan is going to have to announce some measures that amount to regime change in monetary policy.”
Kuroda is Abe’s pick to head the central bank, two people familiar with the discussions said on Feb. 25. The prime minister is also likely to name Iwata, an economics professor at Tokyo’s Gakushuin University, and BOJ official Hiroshi Nakaso as deputies, the people said on condition of anonymity.
The yen has fallen 9 percent since the LDP’s Dec. 16 victory, and reached a 33-month low of 94.77 per dollar on Feb. 25 on speculation Kuroda will push for more easing. Japan’s currency rose 0.3 percent to 91.71 at 6:30 p.m. in Tokyo as investors weighed the timing of new BOJ measures, and as Italy’s inconclusive elections renewed concerns about Europe’s economy.
While the DPJ won’t formally respond until Abe announces his picks, its lawmakers praised Kuroda, a former Ministry of Finance official who called for an inflation target a decade before the central bank adopted a 2 percent target last month.
“Taking his insight and experience together, he is all-in-all a very capable candidate,” Hirofumi Ryu, the DPJ’s deputy secretary-general, said of Kuroda yesterday in an interview. At the same time, “there are some in the party who have concerns about Iwata.”
Iwata in an January interview advocated changing the law governing the central bank to give the government greater say in setting policy goals. The DPJ, which was ousted from power in December, last month dropped its opposition to former finance ministry officials leading the bank while stressing the importance of preserving its independence.
“Kikuo Iwata has insisted that if the inflation target isn’t reached then the BOJ law should be changed to allow the government to fire the governor,” DPJ lawmaker Keisuke Tsumura said in an interview. “I am completely against him.”
He called Kuroda “a very capable person with the kind of experience and knowledge needed for Japan’s economy right now.”
Smaller opposition parties are backing Iwata, reducing the risk Abe will fail to get his choices approved through the opposition-controlled upper house. Hiroyuki Arai of the New Renaissance Party, which has 2 seats in the chamber, today said in an interview that the reported candidates “are well qualified” and would likely get his party’s support.
The Your Party, which has 12 upper house lawmakers, this month said it would back Iwata if he’s nominated. The DPJ has 87 members in the 242-seat chamber, the LDP has 83 and its coalition partner New Komeito has 19. Six seats are vacant.
Abe ousted the Democrats with a platform calling for fiscal and monetary stimulus to end 15 years of deflation. His approval rating rose for a second month to 70 percent, according to a Nikkei newspaper poll published on Feb. 25. Almost 60 percent of those surveyed agreed with his plan to appoint a BOJ governor who favors “bold” monetary easing.
The Nikkei polled 914 people by phone between Feb. 22-24 and gave no margin of error.
Abe’s popularity in the wake of a landslide victory makes it unlikely the DPJ will resist his BOJ nominations, especially for governor, political analyst Katsuhiko Nakamura said.
“Abenomics is widely supported by the public,” said Nakamura, director of research at Asian Forum Japan in Tokyo. “The Democrats are in a very weak position. If they are looking for an issue on which to do battle, the BOJ governor is probably not the top priority.”