(Non) Selection of the Next BOJ Governor: "Rope-a-Dope" Japanese Politics

Rope-a-dope is boxing style used most famously by Muhammand Ali against bruiser George Foreman in their famous "rumble in the jungle". The idea is for the boxer to lie on the ropes of the boxing ring, conserve energy and allow the opponent to strike him repeatedly in hopes of making him tire and open up weaknesses to exploit for an eventual counter-attack.

BOJ watchers began talking about the possibility of selection of the next BOJ governor becoming political football between the ruling LDP (Liberal Democratic Party) and the DPJ (Democratic Party of Japan) a couple of months before the DPJ voted down a succession of two ex-Ministry of Finance candidates for the job. In public, the LDP appeared mystified as to why the DPJ would vote down two apparently qualified candidates (BOJ board member and former MOF official Toshihiro Muto , and Koji Tanami, head of the Japan Bank for International Cooperation and also ex-MOF bureaucrat). Ironically, the two candidates proposed by the DPJ--Haruhiko Kuroda, head of the Asian Development Bank, and Hiroshi Watanabe, head of the Japan Center for International Finance, are also ex-MOF bureaucrates.

The ostensible issue that the DJP has with Mssrs Muto and Tanami is that they are ex-MOF, to which the LDP publicly appears mystified as to why the DJP would unecessarily block the BOJ governor succession process. We believe it is merely "rope-a-dope" politics by both the LDP and the DPJ, hoping that the impasse will have greater political damage to the other party, thereby better positioning them for the July elections. The LDP is hoping the impasse will be perceived by the voting public as an unecessarily obstructionist ploy by the DJP to make the LDP look bad, while the DJP seems to think that the LDP-led Fukuda Administration will lose more points for lack of leadership.

While the lack of a BOJ governor may make foreign investors nervous, the BOJ is now effectively being run by deputy governor Mr. Shirokawa. If Japan really wanted change and an independent BOJ, they would elect former Koizumi Administration reformer Heizo Takenaka. But Mr. Takenaka himself admits he would be unacceptable to both the LDP and the DPJ, as he made a lot of political enemies as Financial Services ministry in trying to clean up Japan's banking system.