MNI ANALYSIS: BOJ Seen Unfazed by Possible Board Vacancies

By Hiroshi Inoue 

     TOKYO (MNI) - Intensifying public criticism of Prime Minister Shinzo Abe's

handling of the year-long political scandal may cause two temporary vacancies on

the Bank of Japan board, but the central bank policy-making is expected to be

little affected, at least until early April.

     The opposition has boycotted parliamentary debate on the fiscal 2018 budget

and other key issues over the revelation that the Finance Ministry's Financial

Department, which manages national assets, doctored public documents to cover up

details of a state land sale at a huge discount to a school operator.

     Finance Minister Taro Aso on Monday announced that MOF officials removed

the reference to Aso, Prime Minister Abe and his wife Akie, among others, from

those documents.

     Abe and Aso have denied that they were involved in the land deal and said

they didn't tell anybody to rewrite official records. 

     The revelation comes at a crucial time for the government to appoint the

new BOJ leadership. The ruling coalition holds a majority in both chambers of

the Diet but still needs to call a plenary session in each house to receive

approval.

     --SOME BREATHING SPACE

     Governor Haruhiko Kuroda is set to serve his second five-year term after

his term ends on April 8.

     This means his official reappointment is expected to take effect without a

delay as the opposition boycott is unlikely to last for more than three weeks,

which would force the government to draft a stop-gap budget for the fiscal year

starting on April 1.

     The opposition is seeking a full account of whether any politicians tried

to influence the price negotiations between the MOF and the owner of a

kindergarten who planned to open a nationalist elementary school on a

government-owned plot of land. In 2016 it was sold at only 14% of the appraised

value.

     This may put other key issues on the back-burner in parliamentary debate

but at the same time the opposition does not want to delay the debate on the

budget to the point of being blamed for causing any adverse effects on economic

activities.

     The five-year terms of the BOJ deputy governors Hiroshi Nakaso and Kikuo

Iwata end on Monday and the appointment of their replacements  may be delayed.

     However, one of the deputies in waiting is Masayoshi Amamiya, a career

central banker who has drafted various monetary easing measures. He has been the

bank's executive director in charge of monetary policy for nearly eight years

and his current term is not up until June.

     --PAST BOJ VACANCIES

     In March 2008, the positions for the BOJ chief and one of the two deputies

became vacant after the five-year terms of the then governor Toshihiko Fukui and

the then deputy governors Toshiro Muto and Kazumasa Iwata ended on March 19.

     The government wanted promote Muto to the top BOJ position but his

nomination was voted down by the opposition, which argued that Muto's background

as a former top MOF bureaucrat would hurt central bank independence from

government influences. The ruling coalition at the time didn't have a majority

in the Upper House.

     On March 20, parliament approved the government nominations for the deputy

governors -- Masaaki Shirakawa, an executive director at the BOJ, and Kiyohiko

Nishimura, a BOJ board member. However, the government's pick of yet another

former finance ministry official for the governor failed to win Diet approval.

     Shirakawa was then promoted to the governor on April 9, 2008 but one of the

two deputy governor positions remained vacant until October 27 that year, when

Hirohide Yamaguchi, an executive director at the BOJ, took office.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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