Sun, Dec 29, 2002 - Page 11 News List

Help wanted at Japan's central bank

GOVERNMENT WORK Since the Bank of Japan won its independence in 1998, it has been held responsible for every conceivable ill in Japan. So who wants the top job?


It is a 10-horse race that no one, it seems, really wants to win.

In a few weeks, Prime Minister Junichiro Koizumi will make one of the most crucial decisions of his tenure: who should replace the governor of the Bank of Japan, Masaru Hayami, when he retires in March. The leading candidates, however, are going to great lengths to say how uninterested they are in the post.

In the twisted world of Japanese politics, the reaction makes sense. Although taking charge of a central bank is considered a crowning achievement in most countries, holding the monetary levers at Japan's central bank is an invitation to be pilloried.

Since the Bank of Japan won its independence in 1998, it has been held responsible for every conceivable ill that has befallen Japan, the world's second-largest economy. It is nothing new for politicians to blame central banks for recessions and deficits. What is different in Japan is the depth of the problems and the fury of the crossfire.

Racked by deflation, a ballooning fiscal deficit and more than a decade of economic stagnation, Japan is suffering woes not seen since the Depression of the 1930s. The troubles are the result of a series of policy missteps (including plenty by the central bank), political infighting and sheer resistance to change. They have turned Japan's once thriving economy into a financial time bomb.

Having stood by as the nation exhausted most of its arsenal of fiscal and monetary weapons, lawmakers are stepping up calls for the central bank to adopt an inflation target, buy more government bonds and take other steps to revive the sagging economy. These are policies long recommended by some Western economists -- one reason the Japanese have resisted them for so long.

But now even the normally fuzzy Koizumi has said the new central bank chief must "tackle the problem of deflation in a concerted manner," code for adopting aggressive policies favored by a growing band of lawmakers.

Kowtowing to fickle politicos or, worse, becoming a lightning rod when things go wrong, is enough to make qualified people think twice about announcing too loudly that they want the job, analysts say.

"The people most fit for the job probably don't want it," said Ryo Hino, an economist at JP Morgan Securities. "The job is too scary."

One leading candidate, Haruhiko Kuroda, looked positively frightened when asked in an interview whether he would accept a post at the Bank of Japan. Kuroda, the vice finance minister for international affairs, oversees Japan's foreign exchange policy. He has a PhD in economics from Oxford University and a deep understanding of fiscal matters, making him a serious contender.

Yet after three nervous laughs and a 90-degree contortion in his chair, he found a way to play down his enthusiasm.

"After 35 years at the Finance Ministry, I want to make a change," said Kuroda, who is scheduled to retire from the ministry on Jan. 14. "I would like to teach and have more time with my family."

Kuroda also made light of his own highly public appeals for an inflation target, and though he wants the central bank to buy more government bonds, he called that ``a technical matter'' for the policy board to consider.

Other front-runners are playing coy, too. Toshihiko Fukui, a former deputy governor at the central bank, told Bloomberg News that the Bank of Japan "shouldn't be pressured" into adopting an inflation target. The remark, which was sympathetic to Hayami, the current bank governor, makes Fukui less appealing to policy-makers looking for a lackey. Yet analysts say Fukui remains a candidate because of his 40 solid years of experience at the Bank of Japan.

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