Nominee for Japan Central Bank Chief to Stand Confirmation Hearing at Parliament

Reviewed by Takahiro MIYAO

Article:
Nominee for Japan Central Bank Chief to Stand Confirmation Hearing at Parliament
International Herald Tribune (4/8/2008)
http://www.iht.com/articles/ap/
2008/04/08/business/AS-FIN-Japan-Central-Bank.php

Comments:

It is reported in the IHT news article linked above that Masaaki Shirakawa, who is a former BOJ (Bank of Japan) executive director and the government's third nominee for the head of Japan's central bank, was to stand his confirmation hearings in both houses of parliament, a move to end the political vacuum for the bank's top position. However, the problem will remain regarding the appointment of a deputy governor, since the government's nominee for that position used be a finance ministry official, a fact that the opposition parties are likely to denounce.

Whoever he might be, it is much better to fill the BOJ's top position than leaving it vacant at the time of financial turmoil in the global economy, where Japan should play a more active role in stabilizing the situation through international cooperation and policy coordination. Here, the initiative of the Bank of Japan's head seems crucially important. In this sense, the appointment of Mr. Shirakawa as the BOJ governor would be a welcome development.

However, one should keep in mind that in the history of the Bank of Japan, those governors who are originally from the BOJ tended to be conservative in monetary policy with more emphasis on curbing inflation than stimulating the economy, whereas those who came from the Finance Ministry have more often adopted stimulus measures rather than restrictive monetary policies. That may have been one of the reasons why the BOJ governorship has alternated between the BOJ and the Finance Ministry officials, namely for balancing purposes. In this context, appointment of Mr. Shirakawa originally from the BOJ as the bank's governor should be regarded as a possible sign of restrictive monetary policy in the near future, and that might not be a welcome development when the Japanese economy seems to be slowing down along with the U.S. economy.

Acknowledgment:
This review is adopted from the following blog (with its Japanese translation):
http://glocom.blog59.fc2.com/blog-date-20080408.html