The Search for a New BOJ Governor
Heretofore, Mr. Koizumi has been pretty consistent in picking reformers for key posts whenever he has had a chance, with perhaps the exception of
Sadakazu Tanigaki, the Cabinet minister in charge of the Industrial Revival Corporation, whose reform record is tenuous, is more of a compromiser, and who already is having to fend off pressure from an LDP task force on the subject that is controlled by the Hashimoto faction and a Dietmember seen as partial to the construction industry.
Both PM Koizumi and just about any other LDP member and/or Cabinet member have made it pretty clear they want a BOJ governor who would be willing to form a pact with the Administration to fight deflation. But even if he found and could get a deflation fighting BOJ governor candidate approved by Upper and Lower Houses of the Diet, the new governor could still face resistance from current members of the policy board, who like Mr. Hayami have voiced their opposition to inflation targeting and other more unconventional anti-deflationary moves (such as buying foreign bonds, as Mr. Nakahara has suggested). To really be effective, the Koizumi Administration may need to successfully place more anti-deflation fighters on the BOJ's policy board. In addition, the CEFP (Council for Economic and Fiscal Policy) has just pushed back their expectations for beating deflation and attaining steady growth by more than two years. The target period for overcoming deflation is now after 2005.
The two gentlemen most mentioned as future BOJ governors of course are not the only candidates. Other potential BOJ governor candidates include;
1) Mr. Takashi Imai--Keidanren honorary chairman and Nippon Steel Chairman, who pushed for the formation of the Industrial Revitalization Corporation.
2) Mr. Satoru Kishi--Keidanren vice-chair, Bank of Tokyo Mitsubishi advisor
3) Naoki Tanaka--21st Century Policy Institute president
4) Mamoru Ozaki--National Life Finance Corp. president.
5) Toyo Gyoten--head of the Institute for Monetary Affairs
6) Eisuke Sakakibara--Keio University Professor and former "Mr. Yen" MOF finance minister for international affairs.
The sharply contrasting views of Mr. Fukui and Mr. Nakahara however are probably most representative of the range of views represented by the above candidates. The following are some sources where both of their views on monetary policy can be found. Mr. Nakahara is already on the FSA's new task force to monitor NPL recovery in the banking industry.
Fukui interview in Asahi
http://www.asahi.com/english/op-ed/K2002111800231.html
Nakahara speech Dec 2001
http://www.boj.or.jp/en/press/koen074.htm
Nakahara interview in Glocom
http://www.glocom.org/opinions/interviews/magazine/20020501_nakahara/
(TT's Take) The selection of someone like Mr. Nakahara, who would apparently aggressively pursue anti-deflation measures, would be taken as a negative for the bond market, even if he were able to effect even a small portion of what he would probably like to do if he had a free hand. But it could also be a victory for the opponents of "pain before gain" reforms, and end up delaying liquidation of NPLs and substantiative corporate reforms.
