The Japanese government is likely to announce its candidates for three top posts at the Bank of Japan next week after Prime Minister Shinzo Abe returns from his U.S. visit.
Prime Minister Abe will likely decide the BoJ candidates after his meeting with U.S. President Barack Obama, Chief Cabinet Secretary Yoshihide Suga said Tuesday. The Japanese premier will visit the U.S. between February 21 and 24.
There is said to be some difference of opinion between Abe and Finance Minister Taro Aso over who should replace Masaaki Shirakawa as BoJ Governor. Abe wants someone who shares his view of an aggressive monetary easing to take over the mantle.
Shirakawa and his two Deputy Governors are scheduled to step down on March 19. Earlier this month, the BoJ Governor announced his intention to quit ahead of the expiry of term on April 8.
Abe's recent policy actions have recently drawn criticism from world leaders and sparked talks of a currency war, as the measures to kindle inflation have led to significant weakening of the yen. Last weekend, Japan escaped direct criticism from the Group of Twenty when the nations' central bank governors and finance ministers gathered in Moscow over the weekend.
The G20 has signaled support from Abe's aggressive easing moves by not singling out Japan in their communique and the rhetoric from the summit suggested that many leaders viewed such moves essential to support the fragile Japanese economy battling deflation.
On Monday, the Japanese currency fell further against the U.S. dollar and the euro and stock markets were higher as investor sentiment was boosted by the G20 stance.
The Yen will stop depreciating when a consensus view emerges about whether the BOJ's new policy will cause spending growth to settle, ING Bank economist Tim Condon said.
Bowing to pressure from Abe, the Bank of Japan adopted bold measures in January by doubling the inflation target to 2 percent and agreeing to "open-ended asset purchases" from 2014.
Media reports suggest that Asian Development Bank Chief Haruhiko Kuroda and former deputy BoJ governors Toshiro Muto and Kazumasa Iwata are the front-runners for the top post. Abe needs support from both houses of parliament for his nominees.
Meanwhile, Aso said Tuesday that the government is not planning to buy foreign bonds as part of its efforts to ease monetary policy. Talking to reporters in Tokyo, he said the government is also not considering an immediate change to the law governing the BoJ.
Aso's comments contradict Abe's remarks on Monday that buying foreign bonds is one option to ease monetary policy. Abe had also suggested revision of the BoJ law if the central bank fails to achieve goals, particularly the 2 percent inflation target, under its mandate.
by RTT Staff Writer
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