Japan Press Weekly

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2008 March 19 - 25 TOP3 [FINANCE]

Government responsible for lack of BOJ head

Akahata editorial

The House of Councilors rejected another government nomination for a Bank of Japan governor. For the first time since the end of WW II, the top job of the Japanese central bank remains vacant.

With the U.S. economy experiencing a state of confusion and the value of the U.S. dollar plunging, the international financial and economic situation is in turbulence. Domestically, people are increasingly discouraged from spending money, and small- and medium-sized businesses are having a hard time managing on their limited funds.

In these circumstances, the Bank of Japan is in need of governor who can responsibly direct the nation’s monetary affairs. The responsibility of Prime Minister Fukuda Yasuo for the situation in which the BOJ is without a head is very serious.

Not an appropriate candidate

The Japanese Communist Party was consistent in opposing the government nomination of Muto Toshiro, a BOJ deputy governor and former vice finance minister, on the grounds that he has forced upon the Japanese people hardships through misguided monetary and fiscal policies. As BOJ deputy governor he pushed ahead with quantitative easing of monetary policy, and as vice finance minister he paved the way for cutbacks on social services. In light of the Bank of Japan Law that provides that the central bank’s mission is to “contribute to the sound development of the national economy,” Muto is not qualified to be appointed BOJ governor.

The Democratic Party of Japan also opposed the nomination of Muto, although for a different reason. It is obvious that the Fukuda Cabinet stubbornly clung to the nomination of Muto even knowing that it would not be acceptable to opposition parties. The House of Councilors rejection had been expected.

After Muto was rejected, the government nominated Tanami Koji, the governor of the Japan Bank for International Cooperation and former vice finance minister, but he is not qualified to head the BOJ either. He was serving as vice finance minister when the Finance Ministry in 1998 established a system to allow tax money to be used to help rebuild major banks. Forcible write-offs of bad loans drove many small- and medium-sized businesses into bankruptcy and accelerated the weakening of local economies.

Answering questions at the nomination hearing in the Diet, Tanami said, “Banks had a hard time disposing of the massive non-performing loans they were holding.” He showed no repentance for his mismanagement. What is more, he praised the financial policy of the late 1980’s that had continued the near-zero-interest-rate policy under U.S. pressure and had caused the bubble economy.

A research organization of the business sector in 2005 published a report of an experts’ panel that included Tanami as a member. Entitled “For overcoming fiscal meltdown,” the report urged the BOJ to adopt an anti-inflation policy through bulk purchases of equity investment trusts, financial futures, and real-estate investment trusts. It also called for the consumption tax rate to be raised and for increased medical burdens to be shouldered by the elderly.

It is impossible to entrust a person, who lacks fiscal and social responsibility with the job of BOJ governor.

The government has recommended Nishimura Kiyohiko, a BOJ policy board member, as a BOJ deputy governor. Nishimura used to say he distances himself from the “structural reform” policy, so when he was appointed a BOJ board member in 2005, the JCP supported his nomination but stated that it would continue to pay attention to his stance. Later he fell into step with other BOJ executives in the Monetary Policy Meetings in support of the continuation of the near-zero-interest-rate policy. This is why the JCP thought it difficult to accept his nomination this time as deputy governor.

Take advantage of the spirit of Diet consensus

Only the government has the right to nominate BOJ executives. The Diet has the duty to express whether it will approve the government-proposed BOJ leadership.

The Bank of Japan Law was revised in 1997 to stipulate that the appointment of BOJ governor and deputy governors requires a Diet consensus because, as the former finance ministry stated, “Public opinion should be reflected in the appointments.”

An argument that opposition parties are to blame for not agreeing with the government-proposed BOJ leadership is outrageous in that it goes against the principle of parliamentary consensus. To prevent this vacuum in the BOJ governor’s post from being prolonged, the need now is for the Fukuda Cabinet to nominate BOJ personnel who can be acceptable to all parties.
- Akahata, March 20, 2008