Japan's lower house of parliament approved yesterday the government's nominee for Bank of Japan (BoJ) chief, setting the stage for a political showdown with less than a week left in the current governor's term.
The approval came a day after the opposition-controlled upper house rejected Toshiro Muto, a deputy governor at the central bank. The opposition said Muto's long history as a former bureaucrat at the Ministry of Finance would undermine the bank's independence.
"The next governor should be able to dialogue with the markets and the financial world, have the power to preserve the bank's independence, and have the presence to project Japan's interests on the international stage," Democratic Party lawmaker Masaharu Nakagawa said ahead of the vote. "The government's choices do not satisfy these criteria."
But the ruling Liberal Democrats, who control the more powerful lower house, defended the choice of Muto.
"The governor has the duty to uphold the bank's independence according to bank law. It doesn't matter what that person's background is or where they have worked," said Takumi Nemoto of the ruling party.
The stalemate in the Diet is a major embarrassment to the government, coming at a time when fears are growing about a global slowdown and central banks around the world are trying to work together to calm jittery markets.
Bank of Japan Governor Toshihiko Fukui will step down on Wednesday. The appointment of his successor needs approval from both houses of parliament.
Muto, 64, was nominated for the top spot last week.
The lower house also approved the government's nominees for the bank's two deputy governor positions. The upper house approved one of the two on Wednesday, former BoJ executive director Masaaki Shirakawa, 58.
Shirakawa, a Kyoto University professor, is likely to step in to serve as interim bank chief if the government and opposition cannot come to an agreement on the appointments.
Prime Minister Yasuo Fukuda's popularity ratings have been dropping lately, particularly over the scandal-plagued defense ministry's mishandling of a military ship's crashing with a fishing boat. Many Japanese are eager to see new political leadership.
Public opinion has been mixed over the imbroglio. Newspaper editorials expressed concern over possible delays in the appointment of new governor.
The Nikkei Shimbun called for politicians to act quickly given the global financial turmoil.
"The international financial crisis appears grave, given that the US and European central banks having stepped in with emergency rescue packages," the paper said in an editorial. "Japan has an international duty to select the next governor quickly."
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