Bank of Japan Governor Toshihiko Fukui faced a barrage of criticism yesterday as he acknowledged he profited from an investment fund whose high-profile founder has been arrested for alleged insider trading.
The central bank chief's admission rattled already nervous financial markets, contributing to the biggest single-day drop on the Tokyo Stock Exchange since the Sept. 11 attacks on the US.
Confronted with allegations by Japan's opposition, Fukui, who rarely speaks on matters outside monetary policy, launched a surprise defense of Yoshiaki Murakami, a bureaucrat turned corporate trailblazer who was arrested last week.
He said he invested ?10 million (US$87,700) in Murakami's fund in 1999, a year after Fukui quit the central bank in an unrelated scandal, and earned unspecified profits before cancelling the contract several months ago.
"It is true that I provided financial resources to him so as to support his initial lofty vision," Fukui told the financial affairs committee of the upper house.
While officially non-partisan, Fukui was appointed in 2003 by Prime Minister Junichiro Koizumi's government, which criticized him yesterday but said his job was not on the line.
"People's trust is very important. It is important that he explain himself as the governor of the central bank should assume his responsibilities," said Chief Cabinet Secretary Shinzo Abe, the government spokesman.
But he added: "We're not thinking of changing the central bank governor."
The opposition Democratic Party of Japan (DPJ) was less charitable to Fukui.
"It is a huge problem. We might even say it is a critical problem," DPJ chief Ichiro Ozawa said. "We may take this issue up in parliament. The prime minister also bears a big responsibility."
Fukui's investment and late admission is "not illegal but it raises questions about his moral responsibility," said Toshihiro Ihori, an economics professor at the University of Tokyo.
"From the standpoint of ordinary people's common sense, his conduct seems a bit strange, especially for a person in such an important position," Ihori said.
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