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Tue, Feb 25, 2003 - Page 12 News List

Central bank governor nominated


Former deputy governor of Bank of Japan, Toshihiko Fukui, 67, during an interview in Tokyo, last year. Fukui has been nominated as the new Bank of Japan governor.


Toshihiko Fukui was nominated by the Japanese government to head the country's central bank, prompting bonds to rise on expectations that he won't move quickly to end almost five years of deflation.

Prime Minister Junichiro Koizumi named Fukui, 67, to be the next governor of the Bank of Japan, Liberal Democratic Party legislator Yoshinori Ohno said. If approved by parliament, Fukui will replace Masaru Hayami, whose five-year term ends on March 19.

Fukui, a former deputy central bank governor, has voiced reservations about setting a target that would force the central bank to print money to stop prices falling. Some investors view Koizumi's choice as a conservative one given Fukui's calls for the government to avoid relying on monetary policy alone to prevent the economy sliding back into its fourth recession in a decade.

"There's not that much difference between Fukui's position and Hayami's," said Tomoya Masanao, portfolio manager in Tokyo at Pacific Investment Management Co, the world's largest bond fund, with about US$70 billion in assets. "He's said the central bank needs to maintain independence from the government, and he's an anti-inflation target person."

The government also nominated former vice finance minister Toshiro Muto and Kazumasa Iwata, a Cabinet official, to be the central bank's new deputy governors, Ohno said. Ohno is chairman of the lower house committee in charge of parliamentary affairs.

The yen weakened as some investors reacted to the nomination of Muto as one of Fukui's deputies, noting Muto's comments in January that Japan was ready to take "decisive action" to weaken the yen.

Fukui became vice governor of the Bank of Japan in 1994 and resigned from the position in 1998 after a senior central-bank official was arrested on bribery charges. He is now head of the Fujitsu Research Institute.

"Fukui may not change monetary policy drastically, such as by setting a target for inflation," said Susumu Kato, chief fixed-income strategist at Lehman Brothers Japan Inc.

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