Bank of Japan governor Masaaki Shirakawa is to step down almost three weeks ahead of the scheduled end of his five-year term, accelerating a leadership transition that may boost prime minister Shinzo Abe’s campaign for more aggressive monetary easing to revive the world’s third largest economy.
Mr. Shirakawa’s decision, announced on Tuesday evening in Tokyo after a scheduled meeting with Mr. Abe, allows a new governor and two deputies to be sworn in simultaneously. That had been the custom until 2008, when a political row over the successor to governor Toshihiko Fukui led to a delay in appointing his eventual replacement, Mr Shirakawa.
“I told the prime minister that I will resign on March 19th with the deputies, so that the central bank’s new leadership can start at the same time,” Mr. Shirakawa told reporters.
News of the governor’s early departure sent the yen down sharply against the US dollar as traders weighed the prospects of a cleaner break from the Shirakawa regime, which has been accused by politicians across the spectrum of not doing enough to combat Japan’s strong currency and persistent state of deflation.
By 9 p.m. in Tokyo the yen was trading at 93.15 to the U.S. dollar, more than 0.8 per cent weaker on the day.
Mr. Abe has repeatedly said that he wants the BoJ to take responsibility for meeting the two per cent inflation target it adopted last month, under the urging of the new Liberal Democratic party-led government that was swept to power in December.
The prime minister is expected to present to the Diet by the end of this month his nominations for the top posts of the central bank, which need to be approved by both chambers of Japan’s parliament.
In March 2008 the government’s nomination for governor of Toshiro Muto – just 12 days before Mr Fukui’s term was to expire – caused uproar among opposition politicians who saw the then-deputy governor as too closely linked to the ministry of finance, where he spent 37 years before joining the central bank.
Concerns over the separation of fiscal and monetary functions are unlikely to be a factor this time, as the main opposition Democratic party spent much of its last year in office applying pressure on the BoJ to ease policy more forcefully.
However, to ensure a smoother transition than in 2008, the government has been consulting with three leading opposition parties before presenting its nominees to the Diet. Opposition votes are crucial to winning confirmation, since the LDP-led ruling coalition lacks a majority in the upper house.
Finance minister Taro Aso has said that the LDP will be assessing candidates on their ability to communicate with financial markets and their experience of managing a large organisation, as well as on their views on monetary policy.
Names long linked to the vacancy include Haruhiko Kuroda, president of the Asian Development Bank, and former deputy governors Kazumasa Iwata and Toshiro Muto, both now running research institutions.
Last month the ruling and biggest opposition parties agreed to eliminate a rule that has prevented the government from picking people for such jobs as BoJ governor if their name has been reported by news media in advance. The rule, established in 2007, was seen as one of the main reasons for the chaotic succession of 2008 which saw the government’s third choice – Mr. Shirakawa – take the top job.