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Empty seat at BOJ worries officials

The Bank of Japan chief vowed yesterday not to let the absence of a governor hamper the country's economic and financial activities, while another bank official said the economy is "sharply" slowing.

The bank has no governor after the opposition-controlled upper house of parliament rejected two government nominations in a row, saying they were too politically connected as former Ministry of Finance bureaucrats to uphold the central bank's independence.

The five-year term of former governor Toshihiko Fukui ended on Wednesday.

A new central bank deputy head, Masaaki Shirakawa, whose nomination was approved last week, was named acting governor this week.

"We are in an unusual situation without a governor," Shirakawa said at a press conference yesterday. "But we cannot let the bank's operations stall. I will fulfill my duties until a governor is appointed."

Kiyohiko Nishimura, the bank's other deputy governor, said Japan's slowdown is getting worse.

"The economy is slowing quite sharply, even though it is on a mild expansionary trend," he said at the same press conference. "We need to manage policy extremely carefully."

The political deadlock is being viewed as a major fumble in a nation preoccupied with appearances, especially on the international stage, amid global financial market turmoil that could require cooperation among central banks.

The political confrontation has brewed for weeks, although the world's second-largest economy risks of slipping into recession.

Meanwhile, Japanese Economy Minister Hiroko Ota expressed hopes a new governor would be named soon while brushing off worries about any possible impact on the economy.

"In the current subprime credit crisis, it is important to be able to react to risks quickly," she said.

Media reports said the selection of a new governor could drag into next month, as some ruling party politicians are hopeful time may calm the outrage in the opposition.

Opposition lawmakers are angry the ruling coalition rammed through legislation that required approval from only the lower house of parliament. The nomination of the Bank of Japan governor needs approval from both houses.
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