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Japan bickers while Rome burns

March 21, 2008

With a looming global financial crisis it’s a very hands-on time for governors of national banks the world over. But in Japan, the top job is vacant while the government and opposition use the appointment as a political football.

That’s the view expressed in a Mainichi editorial published yesterday under the no-nonsense headline “Leaving top BOJ post empty is a crime“.

“To avoid a crisis in the financial system,” the editorial notes, “central banks in major countries are working and communicating closely together to deal with the situation.” Meanwhile in Japan, in its splendid isolation, there’s nobody at the helm.

The appointment of governor of the Bank of Japan (BOJ) requires approval from both houses of the Diet, but while the ruling coalition controls the lower house, control of the upper house is in the hands of the opposition.

If you ask the governing jimintou (LDP), they’ll tell you that the opposition led by the minshutou (DPJ) are simply vetoing any suggestion they make in order to obstruct the business of government. If you ask the opposition, they’ll tell you that the government are attempting to crowbar cronies into the governor’s office, thereby compromising the independence of the BOJ.

U.S. Ambassador Thomas Schieffer said this week

These are pretty turbulent times in the financial markets, and it is important for Japan to have a steady voice people can rely on. It is important for the world economic community to know whose hand is on the tiller at the Japanese central bank.”

Which is a fairly diplomatic way of saying “Stop pissing about”.

The government had first nominated Toshiro Muto, on the not unreasonable-sounding grounds of having been BOJ Deputy Governor. The opposition complained that as Muto had been a Ministry of Finance bureaucrat for 30 years, he “would not be as independent as a central bank chief should be”.

Tellingly though, the Mainichi continued,

They are also angry that the ruling Liberal Democratic Party has rammed through other bills, which require approval only from the more powerful lower house.

So basically after not being able to oppose anything for a while, the opposition were using this opportunity to make a big show of baring teeth by sticking a spanner in a big one.

Then Koji Tanami (another former Ministry of Finance bureaucrat) was proposed. And rejected.

Senior Democratic legislator Naoto Kan said his party also wanted to avoid a vacancy at the central bank’s helm, but Tanami’s career was so similar to Muto’s, it wouldn’t have made sense to block one and not the other. “People would think that’s too illogical.”

So if you’re going to appear obstructive, at least be consistent.

The previous BOJ chief, Toshihiko Fukui, finished his term as governor on Wednesday. In the meantime Masaaki Shirakawa, who has already been approved as one of two deputy governors, is serving as acting BOJ governor as the political impasse continues.

One possible solution to the problem outlined by the Mainichi is that “the government could revise the Bank of Japan law to require only lower house approval for the personnel decision, allowing Fukuda to force through his initial choice, Muto. But the opposition is unlikely to welcome such a move. ” Unlikely indeed.

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