Two opposition parties said they will support Kikuo Iwata for Bank of Japan deputy governor, reducing the risk that Prime Minister Shinzo Abe will fail to win confirmation for all three of his central bank nominees.
The endorsements put Iwata above the threshold needed to win confirmation in the upper house of parliament, provided lawmakers follow their party’s recommendations. The main opposition Democratic Party of Japan yesterday said it would vote against Iwata while supporting Haruhiko Kuroda as central bank governor and Hiroshi Nakaso for the other deputy post.
Abe needs opposition lawmakers to secure the new central bank leadership team, as the ruling coalition lacks an upper house majority. A rejection of Iwata, 70, who has advocated greater monetary stimulus since the 1990s, may reduce the number of BOJ board votes in favor of greater asset purchases as Kuroda presses for more easing.
“It could be a close call depending on whether the DPJ takes a unified stance against Mr Iwata or allows individual members to vote as they wish,” Kyohei Morita, chief Japan economist at Barclays Plc in Tokyo, wrote in a note to clients yesterday. “We believe any stance that causes gridlock and delay could leave the DPJ vulnerable to public criticism ahead of this summer’s upper house election.”
While all three nominees are assured of passing the lower house, they need 118 votes to be confirmed in the upper house. Abe’s Liberal Democratic Party and coalition partner New Komeito have a combined 102 seats, while the DPJ has 87.
The Your Party, with 12 upper house legislators, and the Japan Restoration Party, with three, today endorsed Iwata and rejected Nakaso, while splitting on Kuroda. The New Renaissance Party, which is comprised of two upper house lawmakers, last month said it would back all three of Abe’s candidates.
The lower house will vote on the nominations tomorrow, while the upper house will vote on March 15, Genichiro Sata and Mitsuhide Iwaki, ruling party lawmakers who head the steering committees for each chamber, told reporters today.
The yen strengthened for a second day after the DPJ said it would reject Iwata, rising 0.3 percent to 95.75 per dollar as of 3:12 p.m. in Tokyo. The Nikkei 225 Stock Average fell 0.6 percent after yesterday snapping an eight-day winning streak.
While supporting Kuroda this time, the DPJ reserves the right to oppose him once he is re-nominated next month after finishing outgoing Governor Masaaki Shirakawa’s term, DPJ policy chief Mitsuru Sakurai said yesterday. Shirakawa steps down March 19, before his term was due to end on April 8.
Iwata can still win confirmation should a sufficient number of DPJ lawmakers break with the party line or smaller parties vote for him.
Iwata, a professor at Tokyo’s Gakushuin University, has called for revising the law governing the central bank to give the government more say in setting policy goals.
“His views on changing the BOJ law, especially allowing for firing people, is a complete violation of the BOJ’s independence,” Sakurai said yesterday. “Iwata is unacceptable as deputy governor.”
Iwata told lawmakers yesterday that the BOJ can achieve its 2 percent inflation target “within two years” solely through buying longer-term government debt. BOJ Executive Director Nakaso, Abe’s choice for the other deputy position, testified that he doesn’t see any difference in views among the three nominees.
“Nakaso does seem to be sending slightly dovish signals -- more so than we would expect from a traditional, lifetime central banker,” said Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong.
The BOJ will probably ease at its next policy meeting on April 3-4, assuming Kuroda can marshal enough support on the BOJ board, Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo and a former BOJ official, said in research note yesterday.
Adachi, who expects all three candidates to be approved, said the bank may increase the maturity of bonds it buys for monetary easing to 30 years by combining its asset-purchase fund set up in October 2010 and outright purchase operations, known as rinban.
Minutes released yesterday from the BOJ’s February policy meeting showed that some members said options for easing include buying longer term bonds, and a few members said the bank might have to consider combining bond purchases with the rinban money-market operations.
“It’s becoming pretty clear that the main tool for the new BOJ will be the purchase of more bonds with longer maturities,” said Hiroshi Shiraishi, senior economist at BNP Paribas SA in Tokyo. “BOJ board members are already indicating they are ready to accept that idea.”