New Bank of Japan Governor Masaaki Shirakawa said growth would keep slowing as rising oil and commodity prices weigh on the world’s second-largest economy.
“Higher energy and raw materials costs are causing the economy to slow now,” Shirakawa, 58, told reporters in Tokyo yesterday after the bank cut its economic assessment for the first time in four months and kept the key interest rate at 0.5 percent. “The mechanism of production, income and spending is weakening, but it’s not as if it’s fallen apart.”
Shirakawa’s appointment was approved by parliament yesterday, ending the first leadership vacuum in more than 80 years and following weeks of wrangling between Japanese Prime Minister Yasuo Fukuda and opposition leaders over whether to select central bankers with backgrounds at the Ministry of Finance.
He assumes the post just in time to attend this week’s G7 meeting of finance officials in Washington.
“The public is getting tired of this childish political battle,” said Tomoaki Iwai, a political science professor at Nihon University in Tokyo. “It reveals both the divisions within the DPJ [Democratic Party of Japan] and Fukuda’s inability to realize the political consequences of his actions.”
Hiroshi Watanabe, the government’s nominee to replace Shirakawa as deputy, was rejected by the upper house of parliament because he worked at the ministry.
DPJ members, who control the upper house, say appointing former finance ministry officials on the policy board would threaten the bank’s independence and amount to parachuting former bureaucrats into government posts.
Chief Cabinet Secretary Nobutaka Machimura said that it’s good for central bankers to have finance ministry experience because they must coordinate monetary and fiscal policy.
He also rejected an assertion by DPJ Secretary General Yukio Hatoyama that Watanabe’s appointment would amount to amakudari, or reserving top government posts for former bureaucrats.
“I don’t understand it. Calling this amakudari is nonsense,” he said.
Shirakawa, who has been deputy since March 12 and acting chief since Fukuda failed to appoint a successor to Toshihiko Fukui a week later, indicated he’s flexible about policy.
“It’s not appropriate to have any preconceptions about the direction of monetary policy right now,” Shirakawa said.
The economic outlook is filled with uncertainties that could quickly subside, the governor said, adding that he expects growth to eventually pick up.
“Mr. Shirakawa is probably succeeding Mr Fukui’s slightly hawkish line, but he certainly has to be very flexible in response to changing economic conditions,” said Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp in Tokyo. “The economy is set for a full-fledged slowdown.”
To assess the levels of the country’s borrowing costs, it’s necessary to look not only at short-term interest rates but also longer-term rates, Shirakawa said.
Companies have become “cautious,” the central bank said yesterday, a week after its Tankan survey showed confidence among large manufacturers fell to a four-year low and businesses plan to reduce investment.
Attention needs to be paid to developments in other economies, global financial markets and the effects of high energy and raw materials prices, it said.
Shirakawa worked at the central bank for 34 years before leaving to teach economics at Kyoto University in 2006. He earned a master’s degree in economics from the University of Chicago and worked at the central bank’s New York office between 1994 and 1995.
WAITING GAME: The US has so far only offered a ‘best rate tariff,’ which officials assume is about 15 percent, the same as Japan, a person familiar with the matter said Taiwan and the US have completed “technical consultations” regarding tariffs and a finalized rate is expected to be released soon, Executive Yuan spokeswoman Michelle Lee (李慧芝) told a news conference yesterday, as a 90-day pause on US President Donald Trump’s “reciprocal” tariffs is set to expire today. The two countries have reached a “certain degree of consensus” on issues such as tariffs, nontariff trade barriers, trade facilitation, supply chain resilience and economic security, Lee said. They also discussed opportunities for cooperation, investment and procurement, she said. A joint statement is still being negotiated and would be released once the US government has made
Authorities have detained three former Taiwan Semiconductor Manufacturing Co (TMSC, 台積電) employees on suspicion of compromising classified technology used in making 2-nanometer chips, the Taiwan High Prosecutors’ Office said yesterday. Prosecutors are holding a former TSMC engineer surnamed Chen (陳) and two recently sacked TSMC engineers, including one person surnamed Wu (吳) in detention with restricted communication, following an investigation launched on July 25, a statement said. The announcement came a day after Nikkei Asia reported on the technology theft in an exclusive story, saying TSMC had fired two workers for contravening data rules on advanced chipmaking technology. Two-nanometer wafers are the most
NEW GEAR: On top of the new Tien Kung IV air defense missiles, the military is expected to place orders for a new combat vehicle next year for delivery in 2028 Mass production of Tien Kung IV (Sky Bow IV) missiles is expected to start next year, with plans to order 122 pods, the Ministry of National Defense’s (MND) latest list of regulated military material showed. The document said that the armed forces would obtain 46 pods of the air defense missiles next year and 76 pods the year after that. The Tien Kung IV is designed to intercept cruise missiles and ballistic missiles to an altitude of 70km, compared with the 60km maximum altitude achieved by the Missile Segment Enhancement variant of PAC-3 systems. A defense source said yesterday that the number of
Taiwanese exports to the US are to be subject to a 20 percent tariff starting on Thursday next week, according to an executive order signed by US President Donald Trump yesterday. The 20 percent levy was the same as the tariffs imposed on Vietnam, Sri Lanka and Bangladesh by Trump. It was higher than the tariffs imposed on Japan, South Korea and the EU (15 percent), as well as those on the Philippines (19 percent). A Taiwan official with knowledge of the matter said it is a "phased" tariff rate, and negotiations would continue. "Once negotiations conclude, Taiwan will obtain a better
RSS